On day trading and hedge funds...

Most short term traders won't like to admit it, but the best PhDs in the world are being hired by the most sophisticated institutions to squeeze every pound they can out of short term price discrepancies in the market. Over the last 20 years, hedge funds and investment bank trading desks have invested massively in high frequency algorithmic trading designed to prey on the weaker hands in the market.

In spite of this the cult of technical analysis and day trading has grown and grown. Tax changes created a boom in spread betting, and hundreds of courses have sprung up to teach traders to read short term 'technical' chart set ups. Meanwhile the larger financial websites have happily promoted short term betting products and inappropriately leveraged financial derivatives to an audience that should know better.

It's madness to think individual investors can beat the City with these tools. Hedge funds have all of these trades and more completely covered with complex algorithms and artificial intelligence that are well beyond a private investor's ken. They are the ones taking the other side of the trade and, in doing so, are ensuring that the majority of short term traders go broke as those trades hit stops or margin calls

The truth is that there are very, very few short term inefficiencies in the market, and that if you want to play that game, you are up against the best in the world. Would you tee up against Tiger Woods? Due to high frequency trading, the average length of time that a fund holds a stock before selling has fallen dramatically in recent years, and now stands at less than six months. The truth is that if you want to beat the market, you need to lengthen your investment timeframe and look beyond the immediate term that the quants have so well covered.

Technical analysis can be a useful tool to help you time investments and make money on the Buy, but trading purely on the basis of technical analysis is a mug's game.