Why Traders Have Lost Their Touch

bloomberg.comToday’s traders and portfolio managers — self-described Masters of the Universe — have hardly covered themselves in glory recently. Their surprise and initial panic at the Brexit result doesn’t say much for the extraordinary foresight, skill at managing risk and large pay packages many of them claim.

Truth is, whatever successes they’ve notched till now probably owed more to specific economic conditions than to their talent and brains.

Trading can be broken down into a few fairly simple strategies. Flow trading entails taking positions on the back of customer orders. Buying-and-selling patterns create opportunities for traders to exploit small price changes. Large, dominant dealers that participate in a high proportion of activity are especially well-positioned to benefit.

Satyajit Das

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