trading or demolation in a hidden manner

The post is originally written in late september but is online now.

Recently a not that dear customer came to me and requested some info about trading robots and stocks. I’ve also seen a trading robot which was scriptable by accident in last month. In result of that I’ve started reading about stocks, stock exchanges and trading in my weekends and free times.

We have a relatively good business and team and we were not looking for changing jobs however we are always interested to take a look at opportunities and also expand our business. There were a set of technical questions and more importantly philosophical ones. I needed answers to see if we can and want to spend time and resources on robots or not.

Technically speaking trading is relatively easy. The internet is full of noises, myths and scams but good information can be found in many places which I’m not interested in linking to. Trading by definition is a simple action, somehow like gambling. You can minimize the risk and get good returns (more than 100% annually) by using sound math and statistics. There are a few good books and good articles which help a lot and free libraries and programs are available to help you in the journey. You write small programs which should decide to buy and sell stocks based on what you see in changes in prices. It was doable and could generate a safe stream of income to feed our main business. There might be people who can give you good amounts to buy the robots as well. The concept is new in Iran but is it a good path to go?

From the first day I felt some void in it. You are doing something, spending time and write a program to just sell and buy financial instruments to generate money. You are not producing any goods or providing any services. You are using your super valuable time with money to buy and sell stuff and generate money as a result of it. There are more important curves compared to price curves to be analyzed and there are really important things in this world which are not done but require attention.

I researched for problems which automated trading can make. Found out problems of high frequency trading and seen not much about automated trading with brokers as a ordinary man. I thought we can compensate the waste of the activity itself with the good that we do with the generated revenue which I can see is wrong in retrospection. I’ve overlooked something. TRADING IS FUNDOMENTALLY WRONG!!!

After I shared my findings with a few good friends to get their feedback, I received this from Amir Hossein Fassihi which caused some more research and changed my thoughts on the matter. Thanks man you’ve saved lots of my time and my soul. The email is quoted below with permission.

I hate the stock market and anything related to it. It is yet another example of the lost essence and meaning of something in this world. A lot of things have quite significant reasons for their dynamics but the reason can get hidden under piles of unnecessary dirt as time goes and people forget the main cause.

Stock markets were supposed to bring a system to specify the values of the companies and let people join in and become shareholders and be part of the profit/loss journey of a company, however, a stock market itself turns into the final destination and it becomes all people care about, not the efficiency and dynamics of the companies. Information and a lot of times fake information becomes more important the the real values of the companies.

I hate it when people get addicted to buying and selling shares and it becomes their main issue in life every second, very much like gambling. I hate it when companies are killed in the market only because of superficial reasons. I hate it how the soul of the companies gets crushed when they become public and how they can't decide the future of their company anymore. I hate how decent employees in the US save a major portion of their salary and invest it in all kinds of hedge funds, shares and all the other nonsense, leading to lost money a lot of times in a falling stock market.

 

It is a lot of times like the story of money itself. Money was created to bring a unified and common language for trades and the creation of value in societies but as time went, money itself became the main target and humanity got lost by chasing this superficial target, exactly like shareholders chasing superficial numbers in the form of stock values on a daily changing graph. 

Since I hate everything related to stock markets, I naturally hate the automated stock trade algorithms too, however they can be quite challenging and interesting technically ;).

Cheers,

-ahf

 

What can I say?

Stocks and stock markets are here to let investors put their money in hand of companies and have a share of their revenues and losses. Selling and buying stocks with the speed that traders do does no good to companies. Changes prices with no real reasons and kills companies to make some profits which it’s owners are not entitled to for sure. George Soros  and some others might think they are ok cause they are spending the earned money in good places but it’s not a good idea to do lots of bad things with your money while earning it and later on try to clean it. The people who lost jobs, companies which died and lot and lots of other stuff which just happened because of trading can not be reversed but his actions. Good investors like warren buffett say that you should invest in a company if you want to have the share for more than 10 years. Fortunately Buffett earned more than many others and investing in companies by itself can be considered a good thing. The devil is in the details here, It’s important who you are investing in but that’s another story.

A few TED videos and some articles helped a lot as well. This one just shows some of the realities of the even more harmful high frequency trading.
http://www.ted.com/talks/kevin_slavin_how_algorithms_shape_our_world.html

So I happily concluded that trading by definition is harmful and should not be done. Doing it in a limited amount instead of buying houses and gold might seem a good idea but in general money should not be spent on anything which doesn’t have the value to be spent on. If you have more than what you need, There are many things which can be done with the money. Investing is one of them which is a valid, good and clean one. You can grow the money and help a business. I can not tell it as well as Amir Hossein said but, Automated or not, we’ll never ever do enter such a nasty business, life is not long enough to spend some part of it doing things this harmful and this stupid. I would rather sleep in my bed and never awake if I want to spend my time managing money for the sake of earning money by doing harm to others.

I emailed developers of one of the automated trading software platforms. He is a well respected and nice guy! When I asked him the question about goodness of trading he honestly said I’m write about trading and his argument for doing it was something like this: “We do it because it’s a reality of the world and you should either benefit from it or let others benefit from it and also because what we do mainly redistribute the money toward poor people and countries and removes money from accounts of people with lots of money.” To be honest I’ve seen a lot of bad systems made by good people but we are not talking about it at the moment. His first argument can be said about drugs as well and I can argue that drugs do much less harm compared to many financial activities. The second might seem a little compelling but you never can not be sure about it and even if small scale automated trading in a specific way does that %90 of the times you are still making problems at %10 of times and you can be sure that your problems are big enough. Also as soon as you do it in a bigger scale you have a bigger share of problems for companies and people so at best you should do it at a small scale and does not make much from it, again the question arises that so why do it? If not for money then so for what you should do this activity?

Another awesome friend argued that because companies know this and they enter stock markets with the knowledge then this is valid to be done. This argument is somehow like the first argument of the developers. Almost always when someone does something wrong or enters in situations which might lead to it is aware of it at least partly. He/she is doing that because of laziness, fear, temptation/grid/whatever you call it or because not seeing oneself in the position with ability/responsibility of changing the wrong concept. So nothing can not become valid (really valid I mean) because of that. You might be able to skip laws but not truth.