International Trader's Expo

[Steven Vincent]

Daytrading, Robots and Bears Predominate at Trader’s Gathering in Los Angeles

Sometimes I ask myself what useful purpose a trader serves. Sometimes I wonder if I am any better than the blue hairs who daily gamble the grandkids inheritance in the money temples of Vegas. Then I remember: my purpose is to provide liquidity to the markets. When the market really needs a buyer, I'm there to help. When sellers are in short supply, I'm the go-to guy. In return for this useful service, I take a spread (hopefully).

At the International Trader's Expo in Pasadena, CA from June 3-6, traders from around the country and the globe gathered to learn from the pros, network, schmooze and get up to speed on the latest technologies.

Newbies and Veterans

I'm a bit of a lone wolf. So until now I had gathered my market wisdom from personal experience, my dog eared copy of "Reminiscences of a Stock Operator" and other such tomes and a constant consumption of technical and fundamental analysis from sites such as SeekingAlpha.com. I had never even been to a trader's expo.

Well, I did have a thoroughly enjoyable time. I found those in attendance to be amiable and open. There were pure newbies alongside career pros. It was particularly interesting to meet in person many of the market sages whose work I had followed for 10 years or more. Among them were Tom and Sherman McClellan who invented the McClellan Oscillator, John Bollinger who is best known for his Bollinger Bands, Andrew Cardwell who is the acknowledged expert in the use of the Relative Strength Index, Stan Ehrlich, Harry Boxer, Larry Katz and others.

Steven Vincent at the International Trader's Expo

Like all Expos, the show featured speakers and product demos in the ballrooms of the Pasadena Convention Center as well as Exhibitor booths in the main hall. Represented were trading firms, brokerages, financial publications, advisory services, money mangers, rule-based trading platforms and more.

Representatives of the Expo's producer, MoneyShow.com, commented that the event was much better attended than projected. There had been an expectation of a decrease in interest in trading and investing resulting from punctured confidence after the recent market debacle. Since this was my first Expo it was difficult for me to discern whether or not it was well attended. I can offer some observations about the character of the Expo and its participants.

Make It Quick

The preponderance of interest by attendees and the emphasis of presenters and exhibitors was on short-term daytrading tools and strategies. As a swing trader, I didn't find too much that was tailored to my interests or needs. I commented on this with one of the Expo's producers and it was agreed that future events could provide more for the trader with a longer term horizon. Having said that, much of the technical analytical tools and strategies offered for daytraders could certainly be appropriated by the intermediate term trader as well. For example, Oliver Velez of Velez Capital Management gave an interesting and informative talk on trading breakouts that could easily be applied to any time frame.

I found some of the live daytrading demonstrations to be a little disconcerting. My fear is that someone new to trading might think they can replicate the hyperactive performance they witnessed. I feel such displays of daytrading prowess should be clearly labeled with the caveat: "Don't try this at home!". My personal experience and informed belief tells me that a trader should start by learning to make good decisions and develop good habits in a longer, less frenetic time frame and then gradually work those skills down to increasingly challenging shorter term trading.

If this Expo was any measure, it may be that daytrading is back with a vengeance. Attendees were predominantly interested in methods and tools for trading intraday action. There are even firms which are essentially functioning as online versions of the bucket shops of Livermore’s day or the daytrading rooms of the 90’s. I’m not sure what this means for the markets, but it’s interesting to note.

Rise of the Machines

I was also impressed with the extensive presence of robot trading tools. It’s well known that an increasing level of the daily volume in the markets results from computer program trading. The giant trading firms, hedge funds and institutions routinely employ such technology. But I was unaware of the extent to which computerized trading models had been introduced to the individual trader.

VectorVest Demo

I admit that my first reaction was to look down my nose at the use of a trading robot. For me, I don’t trade only to make money and master the markets. I trade as part of my personal goal to master myself. I felt that to rely upon a computer program to make my trading decisions would be to deny myself the challenge of mastering fear and greed.

Exposure to these systems at the Expo may have caused me to reconsider this position, however. It was pointed out that although some systems are entirely automated, others act more like a sophisticated filtering system for the trader. A program can alert a trader that a set of criteria for a potential trade has been met. The criteria may be predetermined by a program or selected by the trader. In this case the ultimate entry and exit decision is still in the hands of the trader. More or less fully automated systems are available as well.

The major players in “rule based trading systems” appear to be VectorVest, TradeStation and MetaStock. One of the reasons that I have never tried one of these systems is that I am a Mac guy and none of them are available for my platform of choice. I am preparing to format my Intel-based machine for dual duty as a Mac and a PC so that I can begin testing software. Perhaps I will follow-up with a review of “The Best of the Bots” at a later date.

I do wonder what results when bots are trading against bots which are trading against bots in an infinite loop of machine logic. Perhaps at some point the “wetware” of the human brain has a tactical or strategic advantage over the Machines.

Bears and Bears and Bears…Oh My!

With regards to the current market conditions, I came away from the Expo even more bullish than I had been. Looking at the event as a measure of sentiment, I found a nearly universal agreement that a top was near. All trading demos, whether real time or simulated were performed from the short side. Few analysts were long term bullish, with the exception of a few such as Larry Katz who used the opportunity of the Expo to call a long term bottom in the markets. Although we have seen a relatively mild pullback since then, the heavily bearish sentiment at the Expo suggested to me that there may be upside yet in the rally off the March lows.

Thanks to SeekingAlpha.com for sending me to cover this event and thanks to the good folks at TradersExpo.com and MoneyShow.com for their generous and courteous hospitality!