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Floored, But Back On My Feet!


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Floored, But Back On My Feet!

  #91 (permalink)
 
Yuri57's Avatar
 Yuri57 
Budapest, Hungary
 
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tigertrader View Post
@Yuri57

moving target, indeed!

you know what @Fat Tails would say...

"Besser gut shlafen, als gut essen."

"Als fressen" I think I got the point.

But still I think it's possible to trade 1000 lots, just use a mental SL but when a broker gets to know your trading habits is the time to change brokers.

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  #92 (permalink)
 
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 wldman 
Chicago Illinois USA
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@Yuri57 and really believe that I have seen just about everything you could imagine in trading and I can name only a very few locals from the Chicago floor trading community that were typically 1000 up on a given market. This, what we do today is quite a bit different than what went on in the hey day of open outcry market making....meaning that it is way way more difficult today to efficiently trade anything even near 100 contracts at a time from a computer screen.

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  #93 (permalink)
 
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 wldman 
Chicago Illinois USA
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tigertrader View Post
@Yuri57

as bacon would say (robert, not kevin), the grind is taken. as a short-term trader, you get "satisfaction" on a more predictable basis, but you pay a price (risk premium) for the comfort of a higher frequency of gains; that is smaller profits, and higher friction. this kind of trading, was "pit appropriate" because of the advantages afforded the floor trader, i.e., reduced commissions(with a yearly cap), a real edge ( buy/sell-it-on-the-bid/offer), knowledge of the order flow, auditory and visual cues, etc. it was a very un-level playing field that was tilted in favor of the local and was tailored to scalping - high frequency, low expectation. because of these advantages local traders owned the grind.

change venues to the screen, and all the advantages that a pit trader enjoyed on the floor are gone. he immediately becomes an uninformed trader, who gives up the edge, pays higher transaction costs, has to deal with execution slippage, and loses all the visual and auditory feedback he enjoyed in the pit. he goes form making the market, to reacting to the market. in effect, the hfts, have supplanted the local trader/market maker, and inextricably tilted the playing field to their advantage. now they own the grind.

this is question of of market structure, but lets consider price distribution. the majority of trading days are range or mean-reversion days. if we use es as a proxy, only 14% of trading days are trend days. there are big implications here in both psychology and p&l. trends tend to be outliers- low probability trades - frequency is low, expectation is high. the trader now goes from paying a premium, to receiving one. therefore, the big money is in the outliers, because of the way profit opportunities are naturally distributed by the market not evenly, but in concentrated bursts for limited periods of time.

of course, the best approach would be to integrate your trading styles, using a mean-reversion strategy on range bound markets( while avoiding the chop), and a trend following strategy on trend days. but even in this scenario, probably 80-90% of your profits, will come from 10-20% of your trades, and those are the fat tail trend days.

for all the reasons i mentioned above, it is infinitely more difficult to trade size electronically than in the pit. you have to realize, that a floor trader that would accommodate a large order, usually received a substantial edge, which could be anywhere from a tic to 4or5 tics below-the-bid or above-the-offer, and in addition he usually had large resting orders to lean on.

this post should be mandatory for anyone that wants to understand and compete in the game today. More wisdom here than in a lifetime of holy grail indies...with all the secret settings...lol

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  #94 (permalink)
 
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 Anagami 
Cancun, Mexico
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wldman View Post
this post should be mandatory for anyone that wants to understand and compete in the game today. More wisdom here than in a lifetime of holy grail indies...with all the secret settings...lol

+1. A terrific post by @tigertrader . But where does that leave an unconverted scalper like myself?

I would have to argue that one can make a good living as a mean reversion trader... BECAUSE of many more opportunities... though lesser gains per trade.

You are never in the wrong place... but sometimes you are in the right place looking at things in the wrong way.
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  #95 (permalink)
 
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 tigertrader 
Philly, Pa
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Anagami View Post
+1. A terrific post by @tigertrader . But where does that leave an unconverted scalper like myself?

I would have to argue that one can make a good living as a mean reversion trader... BECAUSE of many more opportunities... though lesser gains per trade.

the optimal approach would be integrate both approaches, whether you trade a single instrument , or you take more of a portfolio approach, and trade multiple instruments simultaneously

in either case you, you take advantage of a trend day, by levering up and trading the trend-to-the-end

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  #96 (permalink)
 
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 wldman 
Chicago Illinois USA
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Anagami View Post
+1. A terrific post by @tigertrader . But where does that leave an unconverted scalper like myself?

I would have to argue that one can make a good living as a mean reversion trader... BECAUSE of many more opportunities... though lesser gains per trade.

I have that issue all the time. I want to be a position trading local like back in the day, but that is nearly impossible. Often I feel like I am just trading or scalping the noise and that is outside of what I identify with as a trader. That said, the best guys could always and continue to do as tigertrader suggests.

The "reversion trade" or non trend, as he describes it, is or could be described as a statistical or quasi-statistical model based entry signaled by anything observable and somewhat repeatable. The case for evidence based technical analysis. In my case the trade entries are nearly the same, at least to a point that I review the potential of a trade to not be worth the identifiable risk of entry. The exits on the other had are totally different....more subjective based on what is given. 3 or 4 es handles is not a very productive trend situation outcome BUT six three or four handle trades, some on each side of the market can add up to tremendous productivity to the guy that can repeat the outcome.

Trend also, can be subjective. But the best earners, true enough, are adding to their positions with the trend right at the prices where the majority are starting to take profits. Good traders press the hell out of their winners.

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  #97 (permalink)
 
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 kronie 
NYC + NY / USA
 
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Platform: "I trade, therefore, I AM!"; Theme Song: "Atomic Dog!"
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tigertrader View Post
@Yuri57

as bacon would say (robert, not kevin), the grind is taken. as a short-term trader, you get "satisfaction" on a more predictable basis, but you pay a price (risk premium) for the comfort of a higher frequency of gains; that is smaller profits, and higher friction. this kind of trading, was "pit appropriate" because of the advantages afforded the floor trader, i.e., reduced commissions(with a yearly cap), a real edge ( buy/sell-it-on-the-bid/offer), knowledge of the order flow, auditory and visual cues, etc. it was a very un-level playing field that was tilted in favor of the local and was tailored to scalping - high frequency, low expectation. because of these advantages local traders owned the grind.

change venues to the screen, and all the advantages that a pit trader enjoyed on the floor are gone. he immediately becomes an uninformed trader, who gives up the edge, pays higher transaction costs, has to deal with execution slippage, and loses all the visual and auditory feedback he enjoyed in the pit. he goes form making the market, to reacting to the market. in effect, the hfts, have supplanted the local trader/market maker, and inextricably tilted the playing field to their advantage. now they own the grind.

this is question of of market structure, but lets consider price distribution. the majority of trading days are range or mean-reversion days. if we use es as a proxy, only 14% of trading days are trend days. there are big implications here in both psychology and p&l. trends tend to be outliers- low probability trades - frequency is low, expectation is high. the trader now goes from paying a premium, to receiving one. therefore, the big money is in the outliers, because of the way profit opportunities are naturally distributed by the market not evenly, but in concentrated bursts for limited periods of time.

of course, the best approach would be to integrate your trading styles, using a mean-reversion strategy on range bound markets( while avoiding the chop), and a trend following strategy on trend days. but even in this scenario, probably 80-90% of your profits, will come from 10-20% of your trades, and those are the fat tail trend days.

for all the reasons i mentioned above, it is infinitely more difficult to trade size electronically than in the pit. you have to realize, that a floor trader that would accommodate a large order, usually received a substantial edge, which could be anywhere from a tic to 4or5 tics below-the-bid or above-the-offer, and in addition he usually had large resting orders to lean on.


I can't agree more, and I appreciate your word phrases, because so many of us retail traders, after going a few rounds, either as trading groups gathered around some room, concept or shared approach, have drawn similar conclusions, just not as well worded, thorough or fully aware of all those parallel details.

Successful floor traders, amongst all those that were there, and those that had large accounts, were able to rest against orders and in essence take virtually risk-less trades over and over. As things go, those that were able to do that earliest in the life cycle of the contract traded became powerhouses in the pit.

Electronic success by essence comes from take many small profits, and over time, those themselves adding up to ones targets, goals or needs. Home-run trades happen, but are not the norm, even for position traders willing to stay through overnight margin calls or stay multi-day trades. One has to constantly fight against the natural human emotion of only seeking, preferring or looking for home-run trades, and get back to the grind and grind out a living with less than stellar trades, hopefully of a profitable nature and holding the line on losing trades.

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  #98 (permalink)
 
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 Anagami 
Cancun, Mexico
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tigertrader View Post
the optimal approach would be integrate both approaches, whether you trade a single instrument , or you take more of a portfolio approach, and trade multiple instruments simultaneously

in either case you, you take advantage of a trend day, by levering up and trading the trend-to-the-end

Over the years I found that the optimal approach is the one that fits with my personality (i.e. one that I can stomach). I know this is a trading cliche repeated over and over.... but it's true. For me, that means scalping and frequent winning.

As a trader, I have to feel happy and content with the way I work. Otherwise, I won't be able to execute properly or withstand drawdowns.

You are never in the wrong place... but sometimes you are in the right place looking at things in the wrong way.
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  #99 (permalink)
ckemnitz
Chicago IL
 
Posts: 1 since Apr 2014
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Thanks.
I was down there with you most of the time. from 1979, on. The real computer revolution started
with the introduction of options.

It's been a ride for me, too. I started running to the Gold pit... back at 444 W Jackson.
Soon after that I was on both exchanges. When I go down there I feel like
I am seeing the old South Works.

But not all of us were "floored"!

I am starting over, too!

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  #100 (permalink)
 
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 tigertrader 
Philly, Pa
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ckemnitz View Post
Thanks.
I was down there with you most of the time. from 1979, on. The real computer revolution started
with the introduction of options.

It's been a ride for me, too. I started running to the Gold pit... back at 444 W Jackson.
Soon after that I was on both exchanges. When I go down there I feel like
I am seeing the old South Works.

But not all of us were "floored"!

I am starting over, too!

damn, you must be a real alter cocker?

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