Overwhelming Presence of Algorithms in High-Volume, Modern Markets. . .
Over the past 15-25 years markets have changed substantially in their price micro-structure, although externally they appear to have stayed the same.
Nowadays Algorithms (or shortly Algos) have an overwhelming presence in Modern Markets and are active in all time frames of high-volume trading instruments.
In certain markets, like the CME futures, well over 80% of overall volume is traded by Algos.
In this context using the wrong tools, not capable of capturing the reality of modern markets, makes it very difficult to achieve success in trading. Traders who keep using only traditional technical analysis, especially indicators – that lag price and do not provide any information about how smart participants are positioned – or combinations of analysis tools that provide weak signals, miss the opportunity offered by markets and end up increasing the ranks of loss-making retail traders.
Traders believing in the self-fulfilling prophecies of standard moving averages, bands and geometric and other visual tools (e.g. horizontal and trend lines) or keep adding rules to theur discretionary method, only to end up fitting price data, are likely to end up being average, mostly loss-making or breakeven traders, at best.
Average traders, looking at the same technical tools that everyone else is looking at, can only generate average results. And that, in trading, means losing money.
While I am not suggesting that traditional methods cannot be employed successfully, trading statistics show that it is actually very difficult to reach consistency by doing what everyone else is doing (e.g. using indicators, traditional technical analysis, etc.).
Statistics show that 90% to 95% of retail traders are not profitable.