SIUYA

as mentioned before - it all depends on the broker and type of account you are dealing with. If its a swap account (spread bet/margin account), i would bet the broker is generally trying to lend you the money and charge you for it. If its a cash account with margin - when and if required, then they may only take out margin when you then need it. The broker should be able to give you worked examples. ....and personally I would always wish to use my own cash first rather than a brokers - they will pay you 3% on your cash balances and lend to you at 5% - so why not maximise your broker balance first before borrowing

2 weeks in Fiji - brilliant - getting ready to move countries - not so brilliant....so I will be away further, but I think as option timer has noted this is a long term strategy/project. In answer to your questions, in addition to OTs answers...and these are all personal opinions that work for me.... I use context as I am a discretionary trader - if you are fully systemised then context for you may be programmed in....so with that in mind adding to what OT says above...my definition of context comes purely and simply from a lot of experience, and they are heuristics (rules of thumb) that keep me out of trouble. Such as what do you do when someone puts a plane into a building, what happens if you get a reversing signal when the central bank was clearly trying to stem the tide of a major trend, what happens when you have a lot of correlated trades on (short USD, long EUR, long AUD, long GBP) and every one in the room is talking the same thing. The default position should be to stick with the system - but after a while - once you know the system, there may be things to keep an eye on - this is my version of context. They usually cant be completely programmed so your idea of a flattening EMA can be programmed and back tested....however things like the third time major support is being tested, and fundamentally every one is bullish, and other correlated instruments are already running might give a little more context. (I hope that helps - its entirely personal, and if you can program it then great - but you can still use this and still take the default trade, you just might add an extra little bit of caution saying something like "I am prepared to take more than a usual small amount of small losses on this as I am not 100% convinced." You will still get on the trade, and if you are wrong and the system is right you might only loose a small amount, but if the system is wrong and your caution is right, your small losses will give you comfort.) one example that i know systems have used is - only take the second instance of a reversing trade (ie; a new trend) after a previously profitable trend, but at the same time have a fail safe to ensure you still get on the new trend if its say a V-bottom. You can also program for volatility as well - but then how do you define whats high/low vol, compared to what..... is gold blowing off or just in the middle of a trend??? Again - sorry but this is a personal thing - unless you can back test everything and make it a completely automated system and work out the best thing to do (and then stick to it ) You will also need sufficient capital to do this, and ideally sufficient capital to do this over a wide range of instruments - you then to to take into consideration correlation - do you need to pyramid when you already have a number of highly correlated trades on??? Also there are other alternatives - eg; a long OR short system (never in cash), a system that scales in, and scales out, a system that goes all in/out and scales in/out.....(the joys of many choices and variables ) The problem with trailing stops is exactly as you say - they stop you out, precisely when its probably a good time to pyramid. widening stops is not ideal, increasing the number of trades, but maintaining the small risk per trade (or a variation of this) would be better IMHO A possible solution is to only put on a new trade when you can safely move your first stop to break even, and so your theoretical worst case scenario is still only a small risk, but you have double the upside potential. From the psychology point of view your desire to capture everything can often see you with nothing and the never ending chase for perfection. ....and yes - you can try pick the end of a trend and suck it dry, but its likely the best you can do is capture a majority of it. Its the sitting on your hands thats the hard part (this is an often repeated phrase in trading, and too often ignored) (its like a college party - if you leave early you might miss out on a killer night, if you hang around until the end it could last for days and be talked about for years, but odds are it will just be another long night with a hangover at the end, but every now and again you get lucky)

you have switched what you are comparing in the two scenarios. 1....you are using the base of the margin requirement to calculate your PL multiple 2....you are using the amt deposited with the broker to calculate your PL multiple. which leads to your next question..... the answer here is it depends on the broker, and the type of account. I would say that generally if you are buying on margin then yes the broker will wish to lend it to you (this maximises their profit in general), whereas with a cash funded account there is no lending. Think of it this way - you can borrow from the broker, with in the account, OR you can borrow from a third party before depositing with the broker. there are many ways to do this and you need to understand which your broker does as it can greatly affect the costs over the long term.

or in the case of some large firms ( Nic Lesson as an example ) when someone wants to see your PnL it either because they want a slice of it or think you are hiding something.

agree with all of the above. if there is profit in it then great, if its mad punting with no really strategy then its going to make the broker rich. Now times have changed, but about 6-7 years ago just as high frequency trading was getting going, and option market volumes were picking up, one of the major clearing brokers let us in on a few numbers of their average clients.... They estimated that for every $1 made by the market making firms, about 45 cents went in costs to clearing firms, exchanges and brokers. this was the average, (and also did not necessarily mean the firms made money - but lets assume they did as a basic rule as they were market makers with the theoretical option pricing as their edge, based on what the guy told us). We at the time averaged about 20c cost for every $1 profit - I never wanted to be too high turnover. So for high turn over market making firms thats what they were doing then....if you are worse than this with no edge it might be worth thinking again

hi, OT your post at #348 sums everything up perfectly and you are doing great as a thread starter,project manager and educator for ideas IMHO....and as we are in the psychology section its appropriate, i dont think i can add much more than this..... to me, this strategy is more about the sitting on the hands, then taking the trades as the system (whatever rules you determine to enter) give you, and then managing them with regards the rules - for this strategy it is about sitting on the hands again....that should be your default. if you want to take profits, trail stops, have profit targets etc, then that is a different strategy....and there is nothing wrong with that, but that needs to be recognised. you dont train to play golf by learning to kick a ball about. Once you have the basics right then you will find that rather than wanting to worry about taking profits, you will be more focused on trying to increase those winners - not through taking profits, improving entries and the like, but more through pyramiding, avoiding certain areas (the context) and expanding the universe of instruments. (when i have more time I would like to add to this - hopefully in the next day or two to help OT with the project and in IMHO push the project to its logical next step)

Dont confuse the separate, yet related, issues of the owners of TL and how they wish to deal with vendors and issues of non paying v paying and how they wish to run their site.... and the issue of users wanting to have transparency of who is a vendor. Vendors are not bad, they can be helpful, we want them to advertise, they want to advertise (or generally should ) and TL should be happy for more users to start threads etc....to me the differences are that TL needs to work out the conflicts between various types of vendors, and it seems that all the general users wish to see is some transparency......and possibly the easiest type of transparency is an advert itself..... for those that vend - of any type - courses, teachings, programs, indicators, books....have a simple category type whereby you can clearly see that the person is either a... 1....non paying vendor (not necessarily a bad thing if they are not shameless promoting, are civil, contribute and are not detracting from paying vendors) 2...a paying vendor (who knows how or what amounts). and for both - if they are posting, then as part of their profile they should disclose what they are offering, price, terms etc. This way its clear, people can make up their mind as to the VALUE AND MOTIVE of the post/thread, it is transparent, easier to monitor by TL and adjust their policies to and at the same time the content can be seen for what it is....

maybe they were exiting a trade

yes i have the web version, but the guys in the office with the full blown version were just as slow.....just too much volume and volatility I guess...it sporadically caught up but was never quite up to scratch, and when the match came - forget about it. (personally Iress for ASX was the bees kness - now its no where near as good as it used to be, but its still sufficient, and BB is better - but i dont need the bells and whistles for the extra monthly costs) I am pretty sure the IB servers are back in the US (maybe not), but as a retail product they do pretty well.

we have had similar issues in our office but on different systems. IRESS has been slow - you can see the prices updating ok, but the last sales and the charts have been behind....mind you the volume and speed make this understandable. When you have a whole equity market up or down 1% in less than 3-4 mins at one stage it is to be expected. Interestingly enough IB was accurate for one of the guys in the office while Iress was slow. None of us were trading the ES - only Australia the last few days. trading ES or any other overseas market, you had better have a massive pipe for the info n days like the recent ones, otherwise I dont think you can blame the system.....this is why many banks, hft locate at the exchanges. A friend was up trading the ES and said he just expects this lag and compensates by legging in his positions expecting bad fills.....and then puts in limit orders when taking things off as profit targets but market orders for stops.....he says it is the only way he can be confident of fills....the worst thing is waiting to see if you are done or not as the lag does not give you your position. (I stopped trading the other day as an instance of this caused me enough frustration - thankfully as it would have cost me when the mkt here was down 5.5% then rallied to be up 1% and I wanted to short it)

xioxxio - what are you trading to get radically different broker prices and bberg prices? recent days we have seen this in the office with equities and a few futures due to the massive increase in volume and vol, but normally its all pretty good - but 4s delays is not good...I ask as we also are in Sydney

re pyramiding..... again a large can of worms. What I have found works for me, is I only pyramid, when I can move my prior stop to break even, so that theoretically I only have the same risk on each new trade (as previous trades are now at break even) and this of course ignores risk of draw down of profits, as that is what i am trying to ignore I dont like to pyramid longs in equity markets (as they can and do gap down big time) but I will pyramid currencies, bonds, and short equity positions..... The point of pyramiding is to have a big position on when you catch a trend - its as simple as that, no need to over complicate it (think of it this way - if you day trade and only go one way and stick with the trend and keep taking your position off and putting it on, you are effectively pyramiding except you dont get the benefits of letting it ride, and you have all the hassles of constantly trying to be right.....whereas if you pyramid each time, keeping the risk small for each additional trade then if a trend continues its happy happy joy joy) ....get ingrained the strategy and the entry system first...keeping in mind the ultimate goal is to pyramid, and then use that as your next progression, as you are unlikely to be able to pyramid if you cannot ride the first trade entry.

Put simply.....you only need the higher margin IF you hold a contract over night, if you only trade during the day and close it out at the end of the day then the lower margin is what you need. Re credit worthiness - I laughed, as I have never seen a broker look at your credit unless they are lending you money (maybe they do it behind the scenes) - usually they just take your margin and when you blow up your account you are gone. remember the margin gives you permission to play at the table but once the margin is used up, then you cannot play any more...so you need more than the initial MINIMUM margin

a couple of suggestions if I may.... for an initial stop it should not be..... You set it for how much you are willing to loose and then move on. The bigger bearing on your profitability is in being able to get on, and stay on a trend in this strategy. What the focus should be, and the anxiety appears to be here is - as this is what becomes frustrating, is --- what do you do when your stop is hit, and then the market moves in the direction you originally had? For me, I have a re-entry trade, that way I know that I will still get on a trade. How you do it can easily be setup systematically or as part of the plan, but the key is keeping the losses small, and that way mentally its easier to keep going at something. Obviously it will involve more trades, but this then leads to the next point..... It appears that the frustration/anxiety here is in letting things run......its f..n hard, you constantly see your pl, you want to lock it in, you dont want to miss it "in case" it reverses....we all know the symptoms. But it seems the focus on where to take profits is distracting from the main aim - which is to let them run. Unfortunately I dont know the answer here, but if you persist in trying to find the perfect trailing stop, then you had better find the perfect re-entry point as you will get stopped out all the time and you will miss the trend.....so whats the point. you cant win them all, but you dont need to - you only need a few big wins, and you need to have the ability to make the most of those opportunities.... You have to understand that trends will generally go for longer than you think, and if you can build a few good trades on them, it is scary how quickly you can build your account - and once this mindset is achieved you forget about trying to make a few dollars a day. Plus there are very few v tops and bottoms - most trends will give you enough time to show its having signs of exhaustion, consolidation etc;...... This is one of those aspects that really comes home to bite when you are undercaptialised - its harder to allocate money to a strategy for the longer term, and at the same time allocate money to something to satisfy those day trading cravings with a smaller account.... There are many many many discussions on how to trend follow, and the merits of taking profits - and this is from the big and small players as well. People model these, test them continually and apply many variations of portfolio management and position sizing algos to try and gain an edge, some have long or shorts but no cash positions (they are always in the market).......IMHO there is little middle ground - you will find it hard to be successful being in the middle - either take profits and really work on re-entry (but dont be annoyed when you miss the big moves) or become longer term. Key is if you wish to follow a system such as this, you need to not worry about where to take profits, you need to worry about how best to build positions with small losses. With experience, you will often have to stop yourself from wanting to build a position that is too big at the end of the trend as you have made sooooo much money you think the trend will never end......now thats a problem worth having. ( I hope this does not cause more questions, but rather helps focus the questions you need to ask (yourself) to successfully apply a strategy such as this.) (side note a friend of mine had been chopping around all year making it loosing it, constantly getting stoppped out for small amounts, and having 1-2 winners...result he was slightly down for the year......recent equity turmoil, he made it all back in one short trade, and then as he said took his risk off and was happy to have covered his losses and made some money......had he let it ride for these last few days, he would really have cleaned up....which would you rather - small losses, then small profits, or small losses then cleaning up )

i would suggest you look at your charts first - form an opinion and plan for the day, and only then look at the news - if there is something that really puts your plan into question (and I mean really puts your plan into question) then exercise some patience in the plan maybe eg; be a little more cautious in putting the short you wanted on - but often more than not the market will give you all the information you need - especially if you are trading short term - the market will react far far quicker than any news service unless you are watching a BBerg and reacting with those wire services.

nice thread, if i may add two points...... I would disagree with this in that long term trend followers who are reactionary often do well in times of unusual market events as many unusual market events have their biggest moves at the end of previously existing trends (think market bubbles, or collapses), and so they do very well here - however yes you are right that they often then have periods of drawdown at the end of these - but these are not true outlier events, merely the natural course of the markets. Small point I know but you cant throw the baby out with the bathwater you forgot about three others - the coin flippers, those that try and fade every move anticipating tops and bottoms, and those that come late to the party trying to be reactionary and buy the tops after the big moves have occurred...

yes....often people think there is just a trigger point - if this does this then buy/sell. They quickly forget the setups required for a successful trigger are either found in a confirmation of a number of factors - be they indicators or market context, trends, fundamental factors etc - what ever floats your boat.... point is that these all indicate something might be happening, some setup for a trade might be occurring - the trigger for taking a trade is often a completely different thing.

yes - thats why predictions regardless of their basis are so tough/pointless/meaningless I though the last comment was interesting...sounds like you are a contrarian, I prefer to be part of the crowd, and look for reasons in the price action giving me indications to exit the crowd for a short while, as often market opinions and market actions become divergent. (much like a trader not sticking to his plan) have a good weekend

TURN YOUR CHART UPSIDE DOWN a couple of people in the office were looking at the equity market meltdown yesterday (markets down 5%) saying whens the bottom, is this good bargain hunting territory, what do you think on the chart. As they are natural bulls and generally long only, I took the chart (ASX equity market) printed it out and turned it upside down, and asked them - looks like a bull market to me where you want to buy dips, and hang on doesn't it.....they all agreed. If you have a natural inclination to want to be bullish or bearish, and hence are always looking to go long or short and excuses to do so - turn the chart upside down and see if you have the same opinion - see what your reaction is. (note this is not my idea - its an old one, but a great one for getting the mind out of looking for what you want to see, v what is happening) CAPITULATION SIGNS on the same note - yesterday showed signs of a market in capitulation mode - these are rare events and if you are the wrong side you know it. These are the puke in a bucket days - It is the time you feel like puking in a bucket and if there was one there next to you you probably would. ( If on the other hand you were on the ride side, the giddiness is fantastic, and you have to control yourself from thinking that you are a genius and then stop yourself from thinking you can then pick the bottom). These are the days margin calls are sent out and there a clean outs. So on such days, call your trading mates - ask them if they are giddy or vomiting. ring your broker and ask them about the margins. Then either sit back and wait, or apply a strategy on these days that you know works....as they can be very frustrating if you get it wrong and look back thinking there was opportunity a plenty. (Personally I have been on both sides of the ledger previously and the only strategy I know that woks for me is to decide to close winners at either the start or the end of the day, but not to try and trade intraday - it does my head in an I loose my focus on the big picture. When it comes to the looses - just get out by the end of the day.)

yep you are a cynic those numbers are part of a huge network of monkeys collecting data that is checked and rechecked for accuracy by an elephant and then released to the markets.....if the market does not react the way they want those numbers will get adjusted and revised and re-released with the next set of numbers - this is later done by the donkeys and the goats. Then the fund managers - the sheep - who rely on them and have knee jerk reactions to them after doing all their fundamental research and analysis use them to justify or talk up a position, and ultimately end up saying - sorry no one can outperform the market and so I have done a good job in just keeping up with it and outperforming by -0.2% Later those revised numbers are collated by the economists (they are a whole other breed of animals, and even Noah only let one on the ark as no two could agree) and they then flip a coin as to if they think the previous numbers, or the revised numbers were bearish or bullish and what the market then made of them....much like historians. In the meantime the sheepdogs (the hedge funds and traders) - some of who know what they are doing and are real kelpies, others are poodles and dont know the difference between a sheep and a gucci handbag, run around frantically trying to clip bits and pieces off an ever moving mob of sheep (the market) in the hope of being sucessful and getting fed at the end of the day. Now thats cynical.

funny discussion guys - good little piece of analysis doordie..... going with Tams on this I guess this has been brewing for a bit and has just taken the market some time to wake up. Every crisis is different, yet every crisis has similarities. The Asian financial crisis in 1997 was much the same - 6 months of fundamentally bad news and then one day the equity market craps its self - and that was a far bigger move. Looking back it now a blip. Point is for every fundamental bit of info out there that is bullish, there are plenty of bearish ones too, but its what the market does that is important (unless you have billions to slowly move in and out). You can always point out both sides and make a case - thats what brokers do all day. (a few weeks ago on the same day we saw two reports - one commodities to crash 50-70%, the other was about the super cycle in commodities - all looking at the same info) Whats is interesting for us in Australia is that our market has been one of the worst performing this year - we are already down from the highs around 20% after yesterday and yet we supposedly have one of the best performing economies around - go figure Is this a bargain hunting opportunity, or a sign to exit? who knows.

an increase in an option strikes volume or large increase in overall in open positions may just imply there is increased interest in people protecting a position, or it may mean there is some sort of insider trading going on when it comes to stocks. Depends on how much you are into rumours, conspiracy theories and the like More than anything I think it is a good alert for whats possibly going to be of interest to others - which is what you want. Ultimately you can not really tell if they are just hedging a position, rolling or instigating new positions, and weather or not its a hedge, a speculative position, or even a spread against something else without having a closer understanding of the history of that instrument ....but if there is interest there then it might show more opportunity is brewing. I mean the option instigators (newly opened positions might just have money to burn and no real idea - or they might be a news letter with a lot of subscribers telling them t get into a stock) When it comes to support and resistance - again a lot depends on who holds the instrument and what they plan to do with it - are they hedging speculating, where have they previously hedged etc; I have seen massive open positions been blown through because everyone thought that it would provide support - well, when it did not it quickly became resistance. So you know what they say about assumptions..... end line for me is they can be another tool for scanning and looking for opportunity in conjunction with other tools, but dont read too much into any one situation and understanding the history of the instrument can be pretty important in understanding a particular option trade.

good advice tradewinds. I too have a seperate set of emails for various things. one I have for short term likely to be junk sites, one only for financials, one for friends, business and other normal day to day stuff. Guess which gets the most junk Plus one other thing I do on a regular basis is print out and store separately my bank statements.....you never know....and how else would you prove to your bank you actually had money in it if you only rely on there accounts as a record....so much for the paperless office.

[quote name=optiontimer;124825 Many will give up in the middle of the drawdown' date=' losing the nerve to trade through it. ........... Have you read Curtis Faith's book about his experience trading with Richard Dennis? He talks about the disparity in trading results among ten or twenty traders who were all trading the same system on the same markets. I can tell you what my results are, but that will not tell you what you can expect. -OT very topical as currently trend following is starting to have what looks like a few good months after a few bad years.....I follow some funds and systems that do this, and while 08 was good, generally 09 and 10 have been pretty bad but 11 is looking good in the last few months. Now the point here is this......and OTs above post puts it very bluntly but very well and timely..... the win loss ratio is bad, and you will go through periods of losses and wins and frustrations....but if through those periods you only loose a small amount or break even, and stay in the game and stick to the strategy......you will make money. (big call I know) but dont get all excited when it works to get bitterly disappointed when it does not and then go on to over tweak the system, or drop it and move on to the next search for the holy grail.....

There is two parts (or three really if you think that Tams and Zdo are mean reverting to some sort of super average being (does super average exist ??)) Part one - the method of trading - mean reversion or mean excursion Part two - your definition of mean both a personal, both adoptable...... When you boil it down, two traders can use the same mean, with different methods, and both get good results - it then becomes a matter of cutting losses for both when wrong, running profits, or taking profits will differ between the two, and the end stats will be highly likely to be different in terms of risk:reward, and winners v loosers stats....assuming this is measured over a wide enough time frame and various markets.