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Device Protects Day Traders From Emotional Trading
Philips Electronics, a Netherlands-based company, has come up with a device designed to protect day traders from emotionally based trading decisions. The Rationalizer measures your galvanic skin response and lets you know when you are under stress. An online trader can then take a "time-out, wind down and re-consider their actions," according to the company. This may have come too late for us, but at least future generations won't have to live through the horror of angry day trading.
Not only that, but the first time a trader can't make a trade because the device tells them to chill out, that sucker is flying through a window.
"When life gives you lemons, don't make lemonade. Make life take the lemons back!" -- Cave Johnson
I'm wondering how day trading, as an activity, benefits society. Sure, if done right, it can benefit the individual, but what use is it to the average person? It seems to promote the tragedy of the privates. That is, privately owned resources will be used unsustainably and depleted because the owner can simply take the profits and reinvest them into rapidly depleting some other resource. Communally managed resources will be used sustainably because no one person can abscond with the profits and reinvest them in some other resource depletion scheme. Day trading seems the perfect example of this. Day traders have no connection with the companies they trade in, no commitment to them, no stake in them at all.
With other industries, one can easily see how they benefit society, yet day trading seems to provide no benefit. Maybe someone who understands the function of day trading better than I do can explain what purpose it serves besides making a few individuals rich at the expense of everyone else. Day trading seems more like gambling than responsible ownership. Doesn't it create an unacceptable moral hazard?
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
I'm a trader by profession (although not a day trader) and making emotional decisions is about the worst thing you can do. The only worse thing is NOT making a call because you happen to be excited.
It's a learned behaviour, but a trader needs to be able to abstract away from the trade. You almost need to pretend that somebody else is doing the trade and you're just watching. I think any trader who stays in the job learns this skill eventually. The first time I traded a few million dollars of risk, I was down to few last red cells in my adrenaline stream. If I kept going that way, I'd be either an unemployed or an alcoholic (or most likely both). Instead I learned not to take it too personally. Now a large trade barely increases my pulse.
I don't think a device can replace this behaviour. In a fast market my heart may be way up due to working on several things at once and trying to keep up with the information. I still need to make trades, I just need to stay rational. A glorified heart rate monitor won't help with this.
Not only that, but the first time a trader can't make a trade because the device tells them to chill out, that sucker is flying through a window.
First thing I thought of as well. When money is on the line, they'll find some way around the device. The thing to keep in mind here is that keeping a trader from making trades is the absolutely worst thing this device can do. And it doesn't protect from the worst mistakes: fat finger trades (where the trader makes some grossly expensive typo, though I suppose excessive stress makes this sort of error more likely, it can happen at any time) and double down trading (where the trader is certain they're right and keeps betting the wrong way, "The market can remain wrong longer than you can remain solvent.").