Will Traders Be Replaced by Technologists?

Technology has transformed the trading landscape, with algorithmic trading currently accounting for a significant portion of overall trading volume in the United States. According to recent statistics, approximately 70% of all trading volume is now generated through algorithmic trading. This trend highlights the increasing importance of technology in the financial industry and raises questions about the future role of human traders.

The New Era of Speed: Algorithmic Trading in 2019

Today's most sought-after traders possess a unique skill set that combines traditional trading expertise with advanced technological knowledge. In 2019, over 90% of transactions were driven by algorithms capable of transacting on markets at a scale of 5 microseconds. Transactions at this speed are equivalent to condensing 4,000 years of trading activity into a single day. Such incredible speed necessitates a deep understanding of the physical aspects of trading, as well as the ability to develop and implement sophisticated algorithms.

Race for Speed and Physical Understanding

The modern day trader must grasp and master the technologies that enable these lightning-fast transactions. The new trader of today must be adept at managing and processing vast amounts of data, known as big data, which can amount to tens of terabytes. These traders need to calibrate and back-test complex algorithms that run on massive datasets, often requiring weeks of processing time.

The Evolution of Trading Roles

Traditionally, traders were both the decision-makers and the implementers of trading strategies. However, as technology advances, the role of human traders is evolving. Computers and algorithms are handling an increasing portion of trades, but the decision-making process still ultimately rests with human designers and strategists. This can be seen even in the realm of artificial intelligence (AI), which can be viewed as a form of advanced programming. Ultimately, machines are executing trades based on the specific instructions they are given.

Technology-Driven Trading vs. Human Decision-Making

On one hand, the rise of algorithmic and high-frequency trading (HFT) has led to a reliance on technology. Algorithms can execute trades at mind-boggling speed and scale, outpacing human capabilities. However, the design and strategic oversight of these systems remain in the hands of trained and experienced human traders. This duality underscores the ongoing importance of both technology and human expertise in the trading space.

Conclusion: The Future of Traders

The role of traders is undoubtedly undergoing a transformation. While technology is poised to replace certain aspects of the job, human skills in strategic decision-making and technological understanding will still be crucial. The convergence of these two domains promises to create a new generation of traders who are equally adept at coding algorithms as they are at interpreting market data and making sound investment decisions.

As the financial industry continues to evolve, the question remains: Will traders be replaced by technologists? The answer, as of now, seems to be that while technology will play an increasingly significant role, human traders will still be essential for their unparalleled ability to make intelligent, strategic decisions that cannot yet be replicated by machines alone.