24 Hour Trading Is Coming

There are big changes on the trading horizon as 24-hour trading is becoming more and more a reality.  We discuss how this will affect the markets, what cues we'll be looking for to capitalize on it, and just how important these changes really are.

Creators & Guests

Host

Dave Mabe

Host

Michael Nauss

What is Line Your Own Pockets?

A weekly show for systematic traders who want to make more money from their trading strategies.

Michael: 00:00

Okay, everyone. Welcome back to another episode of Line Your Own Pockets. Some interesting news this week is I think this is the first time we've done anything topical, you know, that's happening. But, what we're gonna talk about today is that 72 Point, I think, is the name of the company. Steve Cohen's company is, had approved the first 24 hour equity trading market in the US.

Michael: 00:23

So I think this is gonna be a pretty big deal, not immediately, but going forward when it comes to systematic trading and trading in general. Right? It it seems like there's this creeps been going on for a while where, you know, I remember pre market was only a couple hours before the market opened and now it's, you know, 5, 6 hours before the market opened till a couple hours after the market closed. But this this creep seems to be going, and this seems to kind of be the final nail in the coffin to make everybody catch up and say, it's time to let everyone gamble on GameStop at 2 in the morning on a Sunday. So what do you think, Dave?

Dave: 01:00

Yeah. I when I first saw this, I thought, okay. Yeah. Big deal. Right?

Dave: 01:06

Few more hours where there's not gonna be a lot of volume. But the more I thought about it, the the bigger a deal it is gonna turn out to be eventually. You know, there's, I mean, there's a whole lot of implications the more I thought about this. And it's it's one of those things where it's not gonna have a huge splash right away, but over time, you'll see changes. And it may take it may take many years.

Dave: 01:35

I mean, it did for remarket trading. And I think it it it will take many years, but I think there will be structural changes in participation, just the way trades are executed, strategies that become available, strategies that disappear. Mhmm. All very interesting things, the more I thought about it.

Michael: 01:57

And I'm with you on that. I think there's there's gonna be kinda 2 steps to this that we'll talk about. And the first one is just the fact that you can trade 24 hours and and what does that mean. But you're right. I don't think there's going to be a whole lot when it comes to liquidity.

Michael: 02:11

You know, maybe some stocks during some events, earnings or something like that may have full overnight liquidity. I think you can already do some of this now on Robinhood. I think you can trade 24 hours, and I don't think it's that popular. But what I'm looking at this as is more of a dissolution of the norms of little things, like what is the open? What is the close?

Michael: 02:36

What is all of this? And I I read, Steve Cohen kind of talking about this, and the reason that he made this 24 hour market and his exact correlation was crypto. Right? So I think that's probably where we could get started where, you know, there's this market out there that I've been trading more and more during this insane insane cycle that's going on. But we have an example for what a 24 hour market looks like.

Michael: 03:02

And now that we've seen that, I think this is what they're gonna model it after. So do you have any experience at all with trading or or running systems or tests on on the crypto market?

Dave: 03:14

No. But I've looked at futures. Those go later into the night. And, of course, of course, Forex. Forex has been around forever and trades 24 hours.

Dave: 03:22

So that's another big, huge market that does trade 24 hours. But, you know, each of those the the big difference, I think, each of those is a finite number of instruments. Right? There's there's a lot of pairs, but there's only so many

Michael: 03:41

Yep.

Dave: 03:41

Compared to US equities where there's a whole bunch of of US equities. So I I think it is very different. The I I think the biggest part is I mean, the big thing that a lot of companies are gonna have to change is their overnight process. Like with trade ideas, there's a huge overnight process that happens and is, is critical that it happens. It's fundamental to how a lot of the baselines are created, a lot of the fundamental data comes in, all the scripts that run that that bring in some of the data points.

Dave: 04:19

All that gets very complicated, and it's, you know, even when you went to 4 AM and 8 the 8 PM for after hours extended extended hours, that window is even tinier. You know, it was tiny then for some of these, companies. So it becomes a more and more difficult technical problem to solve to do that overnight processing that is required. Not like you that just magically goes away. That stuff still has to get done.

Dave: 04:49

So it becomes a real engineering hurdle to get that done in the amount of time that is required. And to go for 24 hours, then what is that window? What does that look like? That's that becomes kind of an engineering nightmare and a really expensive problem to solve.

Michael: 05:06

Well yeah. And I I I think there's some great examples that I I wanna key on. So the reason I I actually mentioned crypto instead of futures and forex is because it doesn't have that problem that you spoke about. Right? There's thousands of different coins out there.

Michael: 05:20

You know, most of them are are just junk. Right? But you could I guess you could make the same argument for the stock market. Right? It's like, you know, of the the Russell 3,000, probably a 1,000 of them are are okay companies.

Michael: 05:31

The rest of them are junk. But, so that becomes a big deal. And and what you were mentioning with the shortening of that window, I think that becomes very interesting as well. Because right now, forex and, futures, they have an hour kind of break every every day. Right?

Michael: 05:48

They close at 6 PM. I think it's 5 EST for an hour, and then they boot back up. So that could be a thing. But what they're proposing here is eventually a push to a 24 hour 365, right, just like crypto where there is just they pick each exchange picks an arbitrary time. Everybody's kind of accepted, UCT, the universal standard time, and they say that's when we're gonna have a candle stop.

Michael: 06:15

But the dissolution of open and close is really what's making me think a lot about this. Because right now, you have this event that happens at 9:30 every day, and that's where all the institutional volume comes in. Everybody makes their bet. You have your most volatile time. Most trading strategies will exist for an hour or so after that.

Michael: 06:35

In you know, fast forward 3 years from now in a 24 hour market, I'm starting to think that that's gone entirely, and we're just trading around major news events. Do you think are you kinda thinking the same way?

Dave: 06:48

I don't think that that that the open and close are gonna go away or become less important. In fact, they might become a little bit less important, but that's where all the institutional volume happens. And it's mostly on the close, and it's mostly in these auctions. Yep. A huge part of it.

Dave: 07:08

And that's a huge liquidity event that big market participants can take advantage of. I don't see those going away. And that's a that's really a huge part of why big institutions trade the stock market is because they have access to these auctions where they can move a lot of stock through them. So I I can't it's hard for me to imagine that becoming a whole lot less important.

Michael: 07:35

Well, so what if right? Because right now, you said on the close, but so let's, again, fast forward a couple years because I read another article actually this morning that in response to this new 24 hour exchange that's opening up, the NYSE, which is the oldest and the biggest out there, is pushing now to 22 hours. They wanna do just a 2 hour, close in the middle of the night. They wanna launch that as early as, I think, q one of next year, which is which is kinda huge. So if all the big guys catch up, then why have the auction at the time they do?

Michael: 08:08

Right? Maybe it makes more sense to have that auction at a different time of day. Right? And I'm just trying I know I'm, like, pushing to get, like, real meta, and we, again, we might be talking 5, 10 years in the future. But the whole is, like, what is an open?

Michael: 08:20

What is a close? I remember when I was building systems in the crypto market, because I worked for a crypto firm doing that, in 2018. That was a big question that we actually had to sit around. I had an hour conversation for is what what is the open and the close? Because back then, this market was so fragmented that every exchange picked their own open and close sign based off wherever they were located.

Michael: 08:43

I could see that becoming a world as well where it's like, okay. We've always kind of accepted that this happens at this time. And the example that I wanna give is I think it was, like, a Thursday or something that the NYC just wasn't open for in the past. The hours of trading has changed since the fifties, I think, 5 or 6 times. So Yeah.

Michael: 09:02

It's not out of the question to say they're gonna change again and just everything's gonna happen at midnight or something.

Dave: 09:09

Yeah. I think there was several decades where the open was at 10 o'clock, and it wasn't until 1985 where it went to 9:30. And the and the hours that we see now are have been in place since then. That's a long time. Yeah.

Dave: 09:24

I think it is interesting. I mean, for for systematic traders, I think it's important. The the question you, bring up there, what is the open? What is the close? There's a lot of data points that I have in a lot of my models that depend on the previous close.

Dave: 09:41

Mhmm. And Change. You know, what does that mean? So and if you think about it, you know, in the post market, if the post market essentially turns into the premarket at midnight, which I mean, if you go 24 hours, it's pretty, it's a pretty arbitrary time of day to, like, make this huge switch.

Michael: 10:03

Yep.

Dave: 10:04

So I think I think it's important to think about what data points you're looking at, what changes you'll need to make. And, I mean, the good thing about systematic trading is if the industry coalesces around the, you know, using the previous close and say, in the post market that, the previous close becomes essentially today's close, which is one option that could happen. You you have the option to make whatever you want. Like, you you could create your own little indicator in your models to treat something else differently to see if that improves your model in some way. So it's important to be, I think, as flexible as possible, but also start thinking about these things and thinking about how it's gonna affect some of your models, how how it's gonna affect the market in general.

Dave: 10:59

I mean, yeah, I think there's, there's huge implications, and some of them are annoying, simply annoying, but some of them are gonna be pretty structural and important.

Michael: 11:12

Well and that's the main reason I want to bring this up is I want people to think about it. So, again, I did a a video on my own channel about this, and that was kind of the takeaway of that. You know, say it takes 6 months for that new exchange to open. There's no volume on it. No one cares.

Michael: 11:27

But then say it takes another 6 months for people to start caring. Right? So now we're talking next year. There's either opportunity you're missing out on or changes that have made that could degrade some models that that, that could change things. Now, you know, I don't wanna get all doom and gloom with everyone because to be honest, I think this is one of those things that will heavily benefit the systematic trader and heavily benefit kind of the automated trader, and heavily hurt the discretionary guy who's, you know, thinks that his mission is to stare at charts all day.

Michael: 12:00

Because the the the old joke is there's no good decisions made at 2 o'clock in the morning. I think that that will carry through with this as well where it's, you know, if you're waking up at 2 and looking at your phone and seeing that the stock that you like is hitting a price, that's not the time to be to be making decisions. So I think what's gonna happen is even if you go back to one of our first episodes where we just talked about basic order types, I think that kind of thing is gonna get way more prevalent, and it's gonna push way more people into it. If you like this stock at $10, no longer are you looking to have that filled in this 6 hour time frame. You could just put out your limit order at $10.

Michael: 12:38

You could put out your stop loss order, and then you right? You don't even the system is just gonna take care of it for you. So, that's kind of the big thing when you start thinking about this. If you haven't made the jump into systematizing your at least your execution, then I think I think this is gonna force you to do it.

Dave: 12:56

Yeah. I think there's one major implication for systematic traders is, like, this was the first thing I thought of. So think about the number of data points you need to collect in in a database to do a back test, an intraday back test. If you're just looking intraday, that's 9:30 to 4 PM. If you wanna do the pre market, all of a sudden, there's probably twice as many bars that you need to collect.

Dave: 13:25

Mhmm. Now if we're going 24 hours, that's another twice as many. So that's 8 more hours. Right? 8 PM to 4 AM where there's gonna be bars.

Dave: 13:34

There's gonna be data. You can just ignore it, but you're not gonna want to. So that's gonna be all all of a sudden, your database gets really large. It takes that much longer to do a back test across a large dataset. It's a it's a lot you know, that much more data to have to manage, and that is not insignificant.

Dave: 13:56

I mean, compare so so you're going from just intraday where you have 4:30 to 6. All of a sudden, you've got 3 times as much data to collect and keep track of and back to us through. Yep. So that's a huge thing. I mean, I remember when I, started collecting a database of intraday minute bars, I got them back to 2,000.

Dave: 14:21

The and when I was doing that collection, I made some kinda arbitrary cutoffs of 8 AM because at the time, there wasn't a whole lot of premarket activity before that. I just made that decision to cut, you know, to cut down on the amount of data I needed to collect and store, and that's that was the decision I made to get a a reasonable amount of data to collect. Well, if you had to do 24 hours, I mean, all of a sudden, that's just a lot more, to have happen. I mean, the other the other thing, that you your comment reminded me of, it when a change like this happens, a lot of people's tendency is to immediately look at what's happening and then sort of assume it's gonna be like that forever. Mhmm.

Dave: 15:12

And

Michael: 15:13

I think we recency bias. Right?

Dave: 15:15

Yeah. So when you need to have something in place where you see something. You make some notes. Maybe you create a baseline. This is another thing systematic traders could do.

Dave: 15:29

Create a baseline of activity and some active stocks perhaps. Create a baseline for yourself, then come back in 6 months, do the same baseline and compare. Because the way it happened with me is I made that arbitrary decision to have 8 AM as a cutoff. In the meantime, there's been an explosion of, pre market activity

Michael: 15:53

Yeah.

Dave: 15:53

All the way to 4 AM. Mhmm. And that kinda snuck up on me. And I should have had a process in place to be watching that more closely than I did. And, if I did that, I would I mean, there's definitely some strategies I trade in the pre market that I could have noticed earlier, I could have taken advantage of earlier.

Dave: 16:15

But I had this arbitrary thing in place where that that sort of hid the details, and and slowly things have changed over time where the the pre market is really important now.

Michael: 16:27

Yeah. I know some, more discretionary day traders who exclusively trade the pre market. As soon as the bell's on, they're they're done. Right? And and their, their synopsis behind it is that they don't wanna get involved with the institutional liquidity.

Michael: 16:41

They they wanna trade. They think that and, right, these are very successful traders, so I'm sure it's true that they think that their edge is that they're trading in a in a time that they're basically just fighting mostly other other retail traders and prop traders. So it is very interesting. And I think that actually leads me to the kind of next topic I want to bring up where, you know, we talk about all the time how you are exclusively a day trader and I am more of a swing trader. If the market's open 20 47, 365, does that line completely go away?

Michael: 17:12

Because now we're just talking as opposed to day trader swing trader. We're talking about, you know, more long term. If I'm able to buy something and put a trailing stop against it, a position that I like from a shorter term basis. And then I can hold it for 3 or 4 days if the thing just keeps going. The the implication of and we talked about this, I know in a prior episode or we're like, don't pigeonhole yourself into.

Michael: 17:39

I'm a day trader. I'm a swing trader. I'm an investor because I think those lines are blurred as well when it comes to Bitcoin, for example, and crypto. I've taken trades that I expected to be in and out of in a day or so and have lasted weeks and vice versa where, you know, I, you know, for example, I bought it when it just recently crashed through a 100,000. I had an order out there to buy it at a 100,000.

Michael: 18:01

I said I'm gonna sell it 102, 103 and just take a quick scalp. And that happened in, like, a minute. And I I didn't know how long that was gonna occur. And I think a lot of the same thing is going to occur when it comes to this kind of trading where the whole idea of I need to be out by the close because I'm worried about this overnight action that won't affect me. As soon as that liquidity starts to catch up in the after hours, I think that that's another thing that's just gone.

Michael: 18:26

Really? There's no we're no longer talking day trading and swing trading. We're talking you buy the stock and and then you sell it whenever, you know, it hits the profit target you have or the trailing stop or whatever it is. So that's another thing I think especially systematic traders need to look at is if, like you mentioned, if you're testing with intraday bars, now it's more about are they 1 minute bars or are they 30 minute bars? And I think that's gonna determine how long you're holding more than anything else.

Dave: 18:53

Yeah. I think you're right. I think that's it's certainly interesting to think about, and, I think time will tell. The one thing I will say is in when you take a step back, I mean, the free marketist in me is totally supportive of this. Any any sort of arbitrary rule you have that prevents people from trading, in in this case, the overnight, I think is bad.

Dave: 19:20

Right? It's it's putting a barrier in place for, information to be processed and to to be sent through your trades. Mhmm. And that's you know, the the the more you can freely exchange and more you can freely trade is, a great information signal. I mean, there's information that comes with every trade that happens That is a signal to the market about what is going on.

Dave: 19:49

So the I I think in general, the overnight is would be great.

Michael: 19:56

Yeah. And, you know, again, it can you tell I've been I'm a stay at home dad now. Are you telling me I'm thinking a lot about this stuff? But, you know, there there's other benefits that I think are amazing as well. So for example, I, as a swing trader, generally don't like to hold foreign ADRs or securities that are are listed in another country.

Michael: 20:15

Let's use China for an example. I don't like to hold those very much because you quite often get this overnight gap risk. And it's it's because if an event happens in China and you're trading, you know, there, then by the time the market opens the next day and your stop order would be triggered, you could be well underwater on that position. This is another thing that I think that that helps dramatically. Because if I buy Alibaba and, you know, the the moves and there's some sort of good event in China or some sort of bad event in China, I know that my orders are still going to happen.

Michael: 20:50

Again, assuming right now, you know, we're saying that stop orders don't work in the pre market and all that. But assuming we're talking full 24 hour market, the NYC gets involved, stop orders and everything work. I think that's another thing. Not only am I more open to these foreign markets, but I think it also means that foreigners that are allowed are more open to the US markets. Right?

Michael: 21:13

So if you are somebody in Singapore or something like that and you want to trade the US markets or Australia, your only option was to either be fully systematic or to get up really early and and trade throughout the night. I think that kind of dispersion is going to happen as well where I'm gonna be more open to stocks that are are foreign, and and people that are foreign are gonna be more open to the US market.

Dave: 21:39

Yeah. So that's one of the major things I think will happen. So, there was something that happened in, running back in the eighties probably or nineties that this made me think of. So at that point in the College Nationals, there were a lot of foreigners. You know, colleges would recruit foreigners.

Dave: 22:03

So you had Kenyans and Ethiopians running for US Colleges and were dominating and still are, for, in large part, dominating the, the races. And in fact, in the NCAA championships, sometimes you would have to so the top 25 are all American. And at the time, you had to be an American to get all American. Mhmm. So sometimes you would go 50 deep to find 25 American to be all American.

Dave: 22:33

Yeah. And I think you'll find the same thing here because, I mean, if you think about it, the the markets are open now 9:30 to 6. I mean, up to 4. There's a lot of parts of the world. That's a really inconvenient time to trade.

Dave: 22:50

Right? That's in the middle of the night in many places in the world. So that just automatically you're excluded. If you had 24 hour markets, I think all of a sudden, you'll have a lot of foreigners where it is all of a sudden more a lot more convenient to trade the US markets. And I think that it will have some huge implications.

Dave: 23:10

I mean, think about,

Michael: 23:13

one

Dave: 23:13

of the traders I'm coaching is a former professional poker player, and he gave me an analogy about poker, where it's really nice that in the US, live poker you have to be there live. You there's online poker, and there's live poker. And that live poker really excludes a lot of, you know, people that don't live in the US that are really good at poker and have, you know, lower requirements for their living standards and are are really good. So it's kinda convenient that they're excluded from live US poker tables. I think that is also I mean, that provides an analogy to think about for US markets and overnight trading and, foreigners being involved.

Dave: 24:04

I think that could have big implications certainly to the less sophisticated retail traders.

Michael: 24:10

Yeah. And you you can see it, you know, using crypto because I think it's the the perfect analogy here. You can see it in crypto. There there's kind of a joke. That's a 100% true that it always makes its most insane moves on the weekend.

Michael: 24:22

Right? You'll have Sunday evening at, you know, or Sunday afternoon at 3 o'clock, you'll have Bitcoin rocket 20% or tank 20%. And I think a lot of that is because you have, again, these other markets, these other participants that are basically waiting for all the Americans to go to sleep where maybe the liquidity thins up a bit, and they can they can push things around. So, yeah, I I am hugely excited for that. And I what I think is going to happen, if I had to got in my head, I had to guess, is you're gonna have these everything's gonna push around events because it's another thing that I wanted to I wanna talk about.

Michael: 24:56

Again, Thinking a lot about this. The right now, all companies, most companies report before the market or after the market. It's very rare you see a company that report earnings as the market's going. And the reason they generally do that is they don't want their stock to go crazy. Right?

Michael: 25:12

So, you know, they'll wait for the market to close, and then they'll report earnings because they know there's gonna be a bunch of crazy after hours action. But most of their investors that are looking at it only see the close to close price. Right? Apple closed at a $100. Yes.

Michael: 25:27

It did some crazy up down 10% after hours, but, you know, it opened the next day up or down a couple percent. Who cares? That's going to be gone as well. Right? So are we going to see the the Wall Street kinda get around?

Michael: 25:43

Okay. We should report earnings around this time of night, and they still pick a fairly liquid time to do it. Or does it just make sense that every company is gonna schedule their earnings report or their earnings call whenever they want? That to me would be very interesting because what that does is it means, you know, reach out to whoever your scanner is right now because I think there's gonna be a huge benefit to being someone who can scan real time volume spikes. Because I think if if you take the entire 24 hour day, and let's say Apple is gonna report earnings at 2 in the afternoon, I think you're gonna have 90% of the volume that's gonna happen on Apple is going to be around this particular event and then, you know, a couple hours after.

Michael: 26:24

So this whole thing of this time of day that things report is just now gone. You're just gonna have these volume spikes on stocks throughout the day as they start to report earnings. That's gonna be, I think, another huge, huge mix up in the market.

Dave: 26:37

Yeah. You know, I'm not sure that it's gonna be more volatile because, in fact, I think it's probably gonna be it's probably gonna make things less volatile. Because think about your your analogy with crypto and things going crazy on the weekend when there's low participation. I mean, think about the overnight right now. There's pretty low participation there because there's literally none.

Dave: 27:03

No participation. So when you have participation, then you can you know, these overnight gaps will be reduced because even if there's just a little bit of participation at first, that will be a calming effect. And I I think overall, it will be it it'll make things smoother. And I agree. Yep.

Dave: 27:26

You know, more systematic.

Michael: 27:29

I think it's more gonna be, and maybe I word it wrong, volatility of the time that it happens, if that makes sense. Right? So, you know, generally speaking, if you know that Apple's reporting earnings after the close, it's going to be a pretty dull day for Apple. Right. People aren't taking huge bets one way or the other.

Michael: 27:46

Generally, it's going to be pretty slow. What I'm more interested in and again, I'm this should be something that I hope our listeners are are viewing as this is going to be a big change for the people who are stuck and don't think like me and Dave does where you can tell we're kind of excited for trying to just we're doing, like, the, you know, the story crafting of of what could be and how would it look and how would I, you know, take advantage of that. Those people, I think, are gonna be fine. The people who are are stuck in their ways, I think, are gonna have a hard time because when you don't have an open close, you're just gonna have it's gonna seem almost random when companies are are reporting earnings. But like you mentioned, if everybody's now allowed to participate, if Apple's reporting earnings at noon and stop orders work and profit targets work and automated trading works, I think, yes, they'll become less volatile, but there'll be more potential opportunity there for a retail trader who's you know, right now, I'm not gonna take a bet in the Apple's earnings even if I have a bunch of data that says that because I can't put out a stop loss order and have that filled at a reasonable price.

Michael: 28:53

But say I know that if Apple runs into earnings, then, you know, most of the time it runs after earnings. Say say I have a really strong data point that that supports that. If there is no you know, I can use all of this automated trading tools when the market is 24 hours, I'd be more amped to take a trade on it. Say, okay. It's meeting all the requirements going into earnings.

Michael: 29:15

I'm gonna take the trade. I'm gonna put up the stop loss based off how volatile earnings don't I can build trading plans around these events. And I know this is what a lot of forex traders do, where they're studying these fundamental earnings or economic reports that come out GDP and all of this. And then they're waiting for the number to hit. And if it lines up with what they're thinking, technically, they're taking these trades and that's where they make most of their money because there's these explosions and volatility that then get corrected, pretty soon after.

Michael: 29:47

I think it's gonna be the same thing for stocks. So I'm very interested on how the technology providers keep up because, you know, if they're Apple's gonna report it's earning at midnight, I need my automated system to pick up that that earnings trade and the increase in volume and then make trades off of it.

Dave: 30:05

Yeah. Yeah. So, you mentioned something earlier about Robinhood offering 24 hour trading now.

Michael: 30:13

Yeah.

Dave: 30:14

Interactive Brokers actually offers 24 hour trading now. I haven't tried it or looked much into it, but I'm I'm I'm pretty sure they do. They limited to interesting.

Michael: 30:24

Yeah. It's like the top, I think, 50 names by liquidity and then a whole bunch of ETFs that they offer 24.

Dave: 30:32

So the other thing that, it makes me think of is, I have a strategy that trades the premarket. And it took me a while, but I figured out how to create a stop order in the pre market that works.

Michael: 30:47

Okay.

Dave: 30:47

So, if anybody's interested in that, send me an email at [e-mail]. I even thought about I think it's pretty good. I I even thought about having a little webinar or something about it to to get some feedback on it because I think it's something I thought about for a while and finally figured it out, and I it it works pretty well with IB. So, yeah, if anybody's interested, send me an email.

Michael: 31:13

Yeah. And I think there's gonna be a lot of this. I think there's gonna be a lot of, the people that are look at the market as a puzzle, which I I think is probably the best way to look at it and something to be solved. I think we're gonna have a really cool time here because, again, we're not meet neither me or Dave is saying that you're gonna wake up tomorrow and all this stuff's gonna happen. But what we're seeing is an obvious road.

Michael: 31:37

And the beauty of capitalism and competition is that if this one guy does it and he starts making a bunch of money on it, you better believe Citadel and all of these other names are going to either join his exchange or create competing exchanges. And eventually you're going to have this volume that's going on. So it's one of those where we we're seeing Pandora's box open a bit. And then I think the next question is just gonna be how much money is is this guy making. If he's making a bunch of money, then I would say in a year or so, every exchange in the world is gonna be 24 hours, 365.

Michael: 32:12

You're gonna have people gambling on the Super Bowl and at the same time buying fart coin and at the same time trading Apple earnings and and the whole, Howard Linds and the creator of Stocktwits and a venture capitalist and the Fintwits face always he he has a whole thing now where he's calling it the degenerate economy and how the this is growing, and I think this is a major major part of that.

Dave: 32:37

Yeah. I think you're probably right. Yeah. I've, I've heard him use that phrase, and, yeah, I think that's that's it's an app phrase to use here.

Michael: 32:45

Yeah. Well, listen. So we don't know what's gonna happen, but it's I think the theme that we're trying to get at is is that, right, the door has been open. It's time as a trader, if systematic discretionary, whatever, you start thinking about this because I personally think, and I could be wrong on this, that in a year or 2, the market is looking vastly different than it is now. And even if your current trading strategies don't degrade, if the open is still the most important time of all these things, you still may be missing opportunity.

Michael: 33:20

Like the example that you gave Dave about not tracking this activity in the pre and post market. So make sure you're thinking about this not only from the side of, you know, I'm worried about what I'm currently doing not working, which certainly could happen. But you're also looking at it as there may be other things that I could be doing that could be doing the same or better. The last thing that I wanted to kinda chat about you, Dave, is the whole buying power aspect. Right?

Michael: 33:50

Because before it was is you as a day trader, I'm gonna utilize my buying power when the market is open, and I'm going to just have a bunch of cash when it's not. Well, if the market's open 247 and there's activity all throughout that market, that's gotta really expand your brain because now you should be able to put different strategies to work while you sleep. It's the old Buffett quote. Right? If you don't make money, if you don't learn to make money while you sleep, then you'll die for probably more elegantly put them that.

Michael: 34:20

So how does that make you thinking about the whole buying power dilemma? Are you just going to even if your normal strategies work, are you gonna be hunting to deploy other strategies throughout the night while you're sleeping?

Dave: 34:34

To be determined. But but I hadn't thought about the the buying power implications. And, specifically, the cutoff where you get 4 times during the day, but only 2 times at night. What is what happens? And I'm not even exactly sure when that which is over.

Dave: 34:51

I assume it's at the close

Michael: 34:52

Mhmm.

Dave: 34:53

Now. But, yeah, that's super interesting. I I didn't even thought about that. But, yeah, I think, I I think that a lot of strategies will probably lose some edge, but new strategies and new edges will present themselves. And it's it's important to think about these changes and anticipate them and watch them.

Dave: 35:19

And, you know, have theories about what changes you think will happen and and watch the markets and see what actually does happen. So and, you know, a lot of edges I've come across and that I've created for myself only came after years of looking at the markets. So it's you have to create a habit for yourself of watching these things, keeping track of things, knowing the right things to look for, knowing the right things to ignore and don't waste your time with. And all that comes with experience. But yeah.

Dave: 35:55

You're right. I mean, it's a super interesting time to be a trader because of these changes. And, you know, the other thing I was thinking about was, as you were mentioning all the money that might that these people might make with these exchanges, all the technical problems that are definitely real, all of a sudden, there's a whole lot of motivation to, to accomplish them and work on them and solve them if there's money involved. So Yeah. That becomes clear.

Dave: 36:24

And, yeah, a lot of these technical problems that seem like huge mountains, all all of a sudden, they'll be tackled for sure.

Michael: 36:32

Well and it's it's the technical problems without getting into the nerd stuff that most people probably aren't interested in. But there's this whole back end of the stock market that not a lot of people understand where it comes to the settlement of shares. The fact that we're still not on real time real time settlement, You know, they they wait till the market closes and then they try to determine who owns what every night with the DCP, whatever it is back end. That's that's government. And they're they're going to have to get off their ass.

Michael: 37:00

And I don't know how well that's going to work. So that might create a whole nother craziness. That's what caused the initial GameStop insanity is there there was no central reporting for a short float. So and everyone ends up being short the stock. So, yeah, there's going to be all of these weird technical hurdles that may actually lead to bugs, which may be exploitable bugs that you can, you know, maybe play with for a while before they get, before they get kind of patched in.

Michael: 37:25

But, yeah, I'm not I'm not a developer like Dave, but I look at this and say, I they better get they better get a lot of things together to not have things just crashing flash crashes. When I did my video, that was actually there was 3 comments on it and say, do you think this is gonna increase the probability of flash crashes overnight? And I said, absolutely. If you don't have all of these liquidity makers playing ball at 2 in the morning and you're not gonna have a human desk watching that as much, that's gonna create some other problems. I think those will be temporary.

Michael: 37:57

You have a couple of those. The market will get all upset. You'll hear about it in the news, and then they'll fix whatever they need to fix. But, yeah, I think it's wild times ahead.

Dave: 38:05

Yeah. Super fun.

Michael: 38:08

Alright. Well, again, thank you all for coming by. And even if, right, you you think me and Dave are wrong and nothing's gonna change and blah blah, Like Dave said, have some sort of system in case you're wrong and and things do change dramatically that you're not leaving money on the table or having things that you you kinda normally do degrade. So I am Michael Noss.

Dave: 38:28

I'm Dave Mabe, and we'll talk to you next week on Line Your Own Pockets.