Alex Preda University of Edinburgh RES

Size: px

Start display at page:

Download "Alex Preda University of Edinburgh a.preda@ed.ac.uk RES 062-23-1204"

Rosamond O’Neal’
8 years ago
Views:

1 Alex Preda University of Edinburgh RES

2 what sociologists of finance do preliminary overview of my ethnography problem: why are retail online traders so resilient to losses? online market transactions as a social activity the effects of group dynamics upon trading conclusion

3 sociology of financial markets communication social cognition networks and groups

4 sociology of financial markets methods: combination of statistical and qualitative descriptive methods direct field observation audio and video recordings interviews use of proprietary datasets

5 communication from talk to trading decisions how traders influence each other bargaining sequences: [time stamp t1] trader1: someone is bullish on [currency] right now. do u see that? [t ] trader 2: looks like a good breakout trade, it just busted the high of 2 days ago [t ] trader2: i'm not touchin that though. [t ] trader1: I didnt really like it either. But someone wanted my to know that they liked it as a quick scalp

6 social cognition emotions and observation on the trading floor (Laube 2010) classifications (Zelizer 1994: how people classify money) influence of social categories on price volatility (Zuckerman 1999)

7 real time emotions Trader (in front of screen, alone): Yeah. How fucked up is that market? [[sings] 13 ] Oh the fucking bitch. Down eight motherfucking percent. Yeah, that s right. That s why you get options to go up for fucking fifty fucking motherfucking years cause I m gonna use every fucking last one of them. [19 ] I m walking the fucking line. [13 ] Another day just to fucking forget about. [9 ] That s another fucking day to forget about. Down three hundred points, yeah every fucking day. Yeah. [33 ]

8 networks and groups influence of crowd size on price volatility (Baker 1984) influence of social networks on pricing and information

9 preliminary/ overview ethnography of day (active) traders: US&UK SEC estimate (2000): 7,000 industry data: 1.5 mill. active accts. US (2008) 15.9 mill. client trades UK (2007) interviews/ participant observation audio/ video recording of traders in action webinars/ forums/ social networking sites/ road shows professional traders/ brokers/ salespeople/ software engineers database social networking site/ over 5,000 traders

10 preliminary/ overview favourable regulation (taxation, leverage) entrepreneurial discourse job prospects of the middle classes spread and growth of online brokerages growing importance of online trading platforms professional shifts within financial trading

11 active traders forums/ webinars/ road shows ECNs / OTC Online brokers/ trading platforms individual s Regulatory bodies (CFTC, SEC, FSA) social networking sites

12 trading as a social activity problems: why are traders so resilient to losses? why don t they quit trading?

13 trading as a social activity explanations: retail traders are less rational than professional traders retail traders have less information/ time to make judgments/ make bad judgments puzzles: many are highly educated/ skilled/ some are former professional traders they are aware of their losses and to a certain extent willing to incur them

14 trading as a social activity perspective: atomized and isolated retail traders trading separated from the traders social lives trading having a single aim: money making online technologies reinforce these assumptions

15 trading as a social activity no assumptions about retail traders being less rational (difficult to find overall criteria for collective rationality) trading as a social, not as an atomized activity not separated from traders lives/ biographies multiple aims/ money making not always the primary aim

16 consequences: online group building and communication (dispersed traders coordinating their trades online) hierarchies and leadership within groups (influencing other traders) trading integrated in the traders broader social lives trading related to traders biographies

17 strategy: humans and algos Trader 1: you saw some algo bids coming in, which is why you got into the Canadian dollar Trader 2: Yeah they will come in, they will swipe offers in terms of seeing an algo coming in and saying, OK, there is an order and algorithm pricing behavior is different from individual pricing behavior, right now, there is more individual pricing behavior taking place [points cursor] look at the time it sells right now one one two one eleven an algorithm pricing behavior it s like four five upticks or four five downticks

18 types of online trading groups retail hedge fund (performance leader manages group money) algorithm builders/ users teaching/ learning close ties/ friendships observational

19 trading integrated into life cycles Currently living in [city, Europe]. Always fond of financial markets, I found out about FX 1 year ago. Since then, I have read, learnt and demo traded as much as possible. Live trading since 5 months ago. My personal goal is to quit my job and trade for a living in 2 years time. I am a retired [profession]. After 26yrs, I decided a change was in order. I love trading the forex market, though sometimes it seems more of a challenge than I can handle! I grew up in [US state], but have now transplanted to [US state] these last 24 yrs. I now work as a full-time forex trader, and have been trading (mostly learning) approx. 5 years, the last 2years, full time. Just an old man trying to learn to trade to quit his job and be home with family. Show me something I can understand and make work is all I ask. I am a former Engineer and Hope to make a living trading Forex. I hope to be profitable within this Year. I have to be more disciplined.

20 trading and personal life Trader: um what I did, for this year, I took out a chunk of money to pay bills, and set it aside and, just, this is it for the year. Now, I m going to have to do that again probably in, uh, the end of December or January for next year. But, it basically, I mean, the house is paid for, so we don t you know, and then we just cover our monthly bills, so well, you know, I mean, this whole education thing has been so outrageously expensive. [laugh] And it put a lot of pressure on me, financially, you know? And I, I made a lot of mistakes because of it, and right now, uh, like I say, that s, that s one of the reasons I m right now, I m just hell-bent on getting, building up my finances this year.

21 family life Trader (talking about her brother):... I guess even if you re in a mediocre school you come to people s attention,ok and um and then he decided he wanted to be in [US city] and er he went to work for [firm] in [US city]. He very quickly became one of the partners in [firm] and two clients... one was um, um, um had a small hi-tech company that he wanted to take public with an IPO... he made the decision that this is the moment to go with the IPO thing, OK, so they brought this little {??} [laughs] this stupid little [name] he was very upset with me because I eventually I shorted it, I mean it was like [laughs] this thing is not real, I mean this is and then I think it hurt his feelings [laughs]... Yeah, no he er let me know, I mean er I could see that he was that he was

22 discipline and virtue A: i lost almost 500$ in this two days the balnce which took me 2months dint took even 254 hrs to take it away from me.. gbpjpy, gbpusd... total down with confidance... hope i will come back with a bang in the market.. now will get back to normal size and back to small lots...:( [...] B: Losing 500 in a day is pocket change buddy. [...] C: pocket change? why so harsh? to some is a lot. [...] D: lol... i lost $520 on d 1st of sept. from an acount of 1300 and since den,i made loss afta loss. y? bcuz i was tryn to make it back by force. i grew from a 500 account to 1300 den kabosh!!! down to $30 you wont blieve it. d ansa i guess is patience and always wait for ur criterias to be

23 virtue and pleasure A: Call me strange. I love trading. For me, it's more about the thrill of the hunt than it is about the money. Yeah, the money is nice, don't get me wrong. Sometimes, I wish it was a 24/7 thing... [...] B: Trading is about making money consistently and with discipline. When you have made a certain amount a day to take the day off. If it is a dull day like a holiday in US or europe take a break. You don't make more by over trading.

24 challenge Trader: um what I did, for this year, I took out a chunk of money to pay bills, and set it aside and, just, this is it for the year. Now, I m going to have to do that again probably in, uh, the end of December or January for next year. But, it basically, I mean, the house is paid for, so we don t you know, and then we just cover our monthly bills, so well, you know, I mean, this whole education thing has been so outrageously expensive. [laugh] And it put a lot of pressure on me, financially, you know? And I, I made a lot of mistakes because of it, and right now, uh, like I say, that s, that s one of the reasons I m right now, I m just hell-bent on getting, building up my finances this year.

25 conclusion: why use soft data? the only way of finding out what market actors are really doing the only way of finding out how they make judgments in real situations analysis of real strategic games

26 conclusion: the uses of soft data statistical relevance? No generalizations? No BUT uncovers real patterns of market behavior first task: inventory of patterns (inductive approach) then: analysis and theory-building

27 Alex Preda University of Edinburgh

FOREX ebook PSYCHOLOGY OF TRADING. Blue Capital Markets Limited 2015 All rights reserved.

FOREX ebook PSYCHOLOGY OF TRADING 1 Content Emotional trading - fear & hope 1 A trading plan in five simple steps 4 Getting Started in Forex Fundamental & Technical Analysis Dont forget there s another