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New combine rules, in particular eliminating the 'time in trade' (TIT) part should be good for me. I did not like that time was a factor - if a trade moves in my favor quickly and I get a profit, what's the difference if it takes 1 minute or 10 minutes? Profit is profit IMO. And it also forced people to game the system, which they mentioned in the squawk. And I did it at times - if my winning TIT was less than my losing TIT, a quick way to fix that is get in a trade with a 1 tick stop. Good chance that stop will be hit rather quickly and can get my losing TIT under 30 seconds. This of course forces you to lose $12.50 + commissions each trade, but it did lower your losing TIT.
So they eliminated the need to take these TIT lowering trades, which just makes obvious sense. While the TIT looked good on paper and in theory, very quick and easy to game that stat.
One advantage to focusing on a handful of markets to trade is that you can learn the market and what is normal or not normal. Today beans opened w/ some large 1 minute bars (which can happen on the pit open), but the large bars and big moves stayed. Typically my 3 point stop provides plenty of room and today it was clear to see early that my stop level was going to be much closer than normal so I did not trade on T4. I could see a trade entry and where my stop would be and usually it's far enough that the trade has room, but today that same stop size would not be under/above my entry bar! That is very odd.
Side note - I have been tracking the soybeans market extensively since March and this is the first time I encountered a limit up situation. While it was going on, I sent an IM to a trading group on Skype that I talk with the following:
[2:05:34 PM] but it may not be allowed to b/c keeps stopping at 13.98
[2:05:47 PM] thats +.70
[2:06:06 PM] so an easy short? lol
[2:08:25 PM] or just keep shorting it damn, it's not allowed to break lol
[2:08:39 PM] probably get huge slippage on the buy stop
[2:08:39 PM] can load the boat and take a few ticks
[2:08:55 PM] or more than a few ticks, wow
[2:08:58 PM] nice 1min bar
While we were joking in chat about this, I sat and wondered - if price is not allowed to break 13980, why not short it? But I am unfamiliar with how limit up's work and in hindsight it was a great, simple trade w/ lots of profit available. Assuming the +.70 level is unable to be broken, seems like a high probability short. One problem w/ this strategy though - you may not trade for months and months.
Here's the 1 minute chart of ZSX3 today and where we started to discuss in our Skype group about a high probability short area:
If someone told you this was a good idea, please - for the sake of your account - do NOT listen to them again. EVER. This was anything BUT a high probability short.
When "lock limits" hit - that's what Beans had for a while today - it may not unlock for days.
Here is an example. Maybe on the day circled you thought price can't go any lower because it hit its daily limit, so its a high probability long.
Problem is, no one else thought buying was a good idea...for days.
This was the 2003 Mad Cow incident in Live Cattle. I got long 2 hours before the Mad Cow event occurred. I got smashed over the next week.
Thanks Kevin! This was the first limit up that I saw in real-time so we were joking in Skype about it, but then I started to think out loud. It just doesn't happen enough for me to have experience with it so today was a big learning experience.
So a follow up question when the day limit is hit -- how/when does price start to move again? I saw beans hit their limit and you could tell on the chart easily with the dashes nothing was going on for 6 minutes. Then price started to move and trading resumed. Then it got back to the limit level and stopped for 1 minute this time. Then it tested the limit level one more time and promptly sold off w/ no break when the level was hit.
I don't understand how/when the exchange freezes prices and when it starts to trade again.
It unfreezes if/when someone is willing to sell below the limit price. So, is limit price is 1398, and no one wants to sell here, no trading takes place, until someone agrees to sell at 1398. Today, that happened 6 minutes later.
Many times, the price will be locked until the next day.
So, you could have sold at 1398, the market stays limit up, and then tomorrow (tonight actually) the price could open 20 more cents higher. You are out at least $1000 per contract in that case.