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Floored, But Back On My Feet!


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Floored, But Back On My Feet!

  #81 (permalink)
 
tigertrader's Avatar
 tigertrader 
Philly, Pa
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Devil Man View Post
@tigertrader just curious if you block trade across correlated instruments/markets?...or your thoughts about incorporating it into a current day methodology?

JD

i'm sorry

i understand the context in which your question is written

but, i really don't have a clear sense of what you're trying to ask me -tt

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  #82 (permalink)
 
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 Devil Man 
Fort Lauderdale
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tigertrader View Post
i'm sorry

i understand the context in which your question is written

but, i really don't have a clear sense of what you're trying to ask me -tt

sorry about that, lets say you have 6 different instruments that you decide are correlated, would you trade all 6 at the same time with your method?

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  #83 (permalink)
 
tigertrader's Avatar
 tigertrader 
Philly, Pa
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Devil Man View Post
sorry about that, lets say you have 6 different instruments that you decide are correlated, would you trade all 6 at the same time with your method?

it's a very difficult question to answer because i'm still adjusting to recent changes in the market

right when i think i have it figured out, things change again

it goes back to what i alluded to in brian's thread - methods need to consider the constantly changing nature of a market's path dependency in terms of variability, duration and signal. a greatly reduced holding period and strategies that take account of variable future paths are now the rule rather than the exception

so, what i attempt to do is determine what game is being played , and play that game - what markets offer the highest probability of making the most money, given the current theme and current drivers of price

to accomplish this, i've gone from trading one instrument at a time to multiple instruments

friday, gold was positively correlated in varying degrees, to zb, dx and 6j, good relative strength to si, and it was negatively correlated in varying degrees to 6e, es, aud/jpy, and the nob

the past couple of days i was short es, long zb, and gc

the reasoning behind the decision was somewhat implicit but also related to volatility and liquidity, and thematic insights

come monday, i'll see how these relationships and the game have changed or remained the same, and adjust accordingly

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  #84 (permalink)
 
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 Devil Man 
Fort Lauderdale
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@tigertrader great, thank you for your insight....and great thread thanks for sharing!

have a good weekend

JD

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  #85 (permalink)
 
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 Yuri57 
Budapest, Hungary
 
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tigertrader View Post
@Yuri57

i watch everything - trade the es, zb, gc, maybe some 6e & other instruments if event driven

tying for more of a portfolio approach, but everything is so correlated now, that it almost doesn't matter

however, if you break down the trade to range, trend, carry (as you suggested) you can not only fit your methodology to the type of market, but also achieve an alternative form of diversification in your portfolio


addressing your question...old habits die hard -i've traded the 30 year contract since its inception, and i like the big tic

So I assume you trade longer term now? Why?

You must also know a lot of traders, do you think it is still possible to trade 1000++ lots?

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  #86 (permalink)
 
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 tigertrader 
Philly, Pa
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Yuri57 View Post
So I assume you trade longer term now? Why?

You must also know a lot of traders, do you think it is still possible to trade 1000++ lots?

@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.

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  #87 (permalink)
 
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 Yuri57 
Budapest, Hungary
 
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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.

Just as I thought, trading big size has a lot to do with "sure" (insider) edge or just call something very high probability. Normally you wouldn't want to risk millions several times in a row because it is not appropriate to have a bad beat with this size Or they had staggering bankrolls.....

Here is a recent interview with Martin Schwartz (btw do you know him personally? :-) )
A Market Wizard Speaks: Marty Schwartz at Amherst College, Spring 2013 - YouTube
He says his last year was his best! Wow....

I think it is still possible to trade size, one just have to wait for the near-perfect psychological points in the market. (As I said I don't believe in probabilities) but I really wonder if it is safe to trade size, since if you have a position with a 1000 lots and a close stop, you are a moving target

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  #88 (permalink)
 tflanner 
Chicago, IL
 
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Tiger- just stumbled acrros this thread.

I grew up in Oak Park, IL and started wkg at the CBOT (full time) in 1987. I was a futures broker for Dean Witter and JPM in the bond room. It was amazing how large the locals on the floor traded back then.

I left the floor in 2001 and traded the Treasury Yield Curve for a decade. At present I am trading the indices.

We celebrated my Dad's 81st b-day yesterday. We were talking and he said he feels bad for all of us that we have to sit in front of computer all day for a living. Said it would be a horrible way to make a living. Got me thinking how much I miss the floor and what a special place it was. The energy was unbelievable. I enjoy electronic trading but it is very lonely. The floor was a special place.

In your original post Charlie D, Steve Lawrence, Tom Baldwin.....cowboys.....and true risk takers. At JPM I did a lot of business for East Coast blue bloods and none of these guys were in the same class as the large exchange locals. The blue bloods traded other peoples money and I think they were always schocked when they said "sell 500 hundred bonds" and would then ask who bought em. I would say Tom Baldwin....

"Free markets for Free Men."

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  #89 (permalink)
 
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 tigertrader 
Philly, Pa
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tflanner View Post
Tiger- just stumbled acrros this thread.

I grew up in Oak Park, IL and started wkg at the CBOT (full time) in 1987. I was a futures broker for Dean Witter and JPM in the bond room. It was amazing how large the locals on the floor traded back then.

I left the floor in 2001 and traded the Treasury Yield Curve for a decade. At present I am trading the indices.

We celebrated my Dad's 81st b-day yesterday. We were talking and he said he feels bad for all of us that we have to sit in front of computer all day for a living. Said it would be a horrible way to make a living. Got me thinking how much I miss the floor and what a special place it was. The energy was unbelievable. I enjoy electronic trading but it is very lonely. The floor was a special place.

In your original post Charlie D, Steve Lawrence, Tom Baldwin.....cowboys.....and true risk takers. At JPM I did a lot of business for East Coast blue bloods and none of these guys were in the same class as the large exchange locals. The blue bloods traded other peoples money and I think they were always schocked when they said "sell 500 hundred bonds" and would then ask who bought em. I would say Tom Baldwin....

"Free markets for Free Men."

you'll get no argument from me, on anything you wrote

we both know who had the brains AND the balls...

there's big difference between trading your own money vs. other people's money

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  #90 (permalink)
 
tigertrader's Avatar
 tigertrader 
Philly, Pa
Legendary Market Wizard
 
Experience: Master
Platform: NinjaTrader
Trading: ES, ZB
Posts: 6,482 since Jul 2010
Thanks Given: 6,662
Thanks Received: 36,258



Yuri57 View Post
Just as I thought, trading big size has a lot to do with "sure" (insider) edge or just call something very high probability. Normally you wouldn't want to risk millions several times in a row because it is not appropriate to have a bad beat with this size Or they had staggering bankrolls.....

Here is a recent interview with Martin Schwartz (btw do you know him personally? :-) )
A Market Wizard Speaks: Marty Schwartz at Amherst College, Spring 2013 - YouTube
He says his last year was his best! Wow....

I think it is still possible to trade size, one just have to wait for the near-perfect psychological points in the market. (As I said I don't believe in probabilities) but I really wonder if it is safe to trade size, since if you have a position with a 1000 lots and a close stop, you are a moving target

@Yuri57

moving target, indeed!

you know what @Fat Tails would say...

"Besser gut shlafen, als gut essen."

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