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TA Debunked

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Some traders have families to support and are the primary wage earner let alone tax issues. Simply, a young trader with no debt while still living at home with mom & pop is more likely to be compounding in comparison to someone with debt and sending the kids to private school.

 

Thus, the young single trader in comparison has a much better chance of compounding in comparison to someone that has a family to support. In addition, throw in some realities like a divorce, serious family health issues at some point in a trader's career and the revenue service wanting their share...

 

I think you get my point.

 

You must be single and/or with no family and/or not the primary wage earner ?

 

Hi, wrbtrader,

Man, hahaha so true. To become a succesful trader my biggest challenge was not to find a winning strategy and developing a trading plan (seriously, thats the easy part). For me it was figuring out a strategy AROUND my family life. Got 3 kids , two go to private school and one little one (11 months) demanding attention 24/7 . The wife also works so half the time i'm changing diapers and looking at the charts at the same time. The single dude living at his parents house has such a huge advantage (only a shame you realize that when its too late and paying bills like there is no tomorrow hahah).

Sorry, didn't want to get off topic here but i guess there are traders out there that know exactly what i'm talking about. "How to be a trader and having a family life" could be a good title for a whole new thread. ;)

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* * *There are very few limits on scale-ability in liquid markets nowadays - you could flip a few thousand ES contracts back and forth all day with no problems * * *

 

Flip a few thousand ES contracts back and forth all day? Sure, why not? Anybody want to put up $20,000,000? I'd be happy to demonstrate. LOL..

 

Seriously, it's easy to see that the liquidity is there. If that is the goal for a trader TRADING HIS OWN MONEY, the puzzle to solve is how to get to that many contracts without losing one's head. It is not as straightforward as continually adding contracts as soon as more margin becomes available.

 

Of all the people who think it's no big deal scaling up to thousands of contracts, I'm wondering how many of them have ever lost $100,000+ of THEIR OWN MONEY trading in a day? How many have lost $500K of THEIR OWN MONEY in 2 weeks? It's an interesting experience. I highly recommend it to any trader with easy dreams of scaling up big starting with a 1-lot. Just be careful who you share the experience with. A girlfriend wearing an engagement ring that "only" cost $15,000 may have a difficult time understanding.

 

Oh and don't be surprised if you get assigned a collection agent and a field agent from the state tax department looking into your prior years' income. I realized I had made it out of the Piker League when a field agent came knocking on my door unannounced.

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Unless they are trading iliquid instruments then I am farily dubious about this; there are countless short term market participants who trade with high frequency on a scale that dwarfs anything that could be achieved with a million dollar account. There are very few limits on scale-ability in liquid markets nowadays - you could flip a few thousand ES contracts back and forth all day with no problems (someone please correct me if I am wrong about this).

 

Of course, if the people you're referring to are, say, market makers in single stocks, then I understand what you're saying.

 

BlueHorseshoe.

 

EuroDollar (not confuse with Euro FX) has contract size of USD $1million and aggregate daily volume of about 2 million contracts. That's $1,000,000 x 2,000,000 contract daily volume, or $2,000,000,000,000 [2 trillion] worth of daily volume:wtf:

 

Ten year US treasury notes are #2 (i think) in volume * contract size.

 

The S&P is arguably the 3rd and can move up/down in rank depending on the value of the underlying index. I'm probably overlooking energy contracts. (I didn't go through the entire list and match up the contract specs).

 

Exchange margin requirement as of today is "only" $500-1000" depending on how far out in the future the contract is. Most brokers have day trading margins that cut that in 1/2 or more for electronic markets). That's 1:1000-1:4000 leverage. More on that in another post. The point is, liquidity is not a problem;), especially if you can spread out into multiple contracts.

 

The CME actually provides volume statistics for each market category (agriculture, grains, fx, etc), for the different exchanges in the CME group, and for the total volume in all of the CME group.

 

Hi, wrbtrader,

Man, hahaha so true. To become a succesful trader my biggest challenge was not to find a winning strategy and developing a trading plan (seriously, thats the easy part). For me it was figuring out a strategy AROUND my family life. Got 3 kids , two go to private school and one little one (11 months) demanding attention 24/7 . The wife also works so half the time i'm changing diapers and looking at the charts at the same time. The single dude living at his parents house has such a huge advantage (only a shame you realize that when its too late and paying bills like there is no tomorrow hahah).

 

Sorry, didn't want to get off topic here but i guess there are traders out there that know exactly what i'm talking about. "How to be a trader and having a family life" could be a good title for a whole new thread. ;)

....you must use as much automation as possible. As Dan Weiss said in one of his recent marketing videos: "....[paraphrasing] yes, you can make money doing xxxxxx, buy can you make a living from it? Not without automating the majority of the repetitive parts of the business."

 

Good to know your wife supports you in this business. it can be a hard sell among financers (viewed as gambling) and family (viewed as gambling/unstable income). Especially if you are trading with the rent money. And living up to Western standards of living.

Edited by 4EverMaAT

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Flip a few thousand ES contracts back and forth all day? Sure, why not? Anybody want to put up $20,000,000? I'd be happy to demonstrate. LOL..

 

Seriously, it's easy to see that the liquidity is there. If that is the goal for a trader TRADING HIS OWN MONEY, the puzzle to solve is how to get to that many contracts without losing one's head. It is not as straightforward as continually adding contracts as soon as more margin becomes available.

 

Of all the people who think it's no big deal scaling up to thousands of contracts, I'm wondering how many of them have ever lost $100,000+ of THEIR OWN MONEY trading in a day? How many have lost $500K of THEIR OWN MONEY in 2 weeks? It's an interesting experience. I highly recommend it to any trader with easy dreams of scaling up big starting with a 1-lot. Just be careful who you share the experience with. A girlfriend wearing an engagement ring that "only" cost $15,000 may have a difficult time understanding.

 

Oh and don't be surprised if you get assigned a collection agent and a field agent from the state tax department looking into your prior years' income. I realized I had made it out of the Piker League when a field agent came knocking on my door unannounced.

 

It's as easy as moving the decimal point over. Check out these recent returns from recent forex contest:

 

Trading Championship May 2012 | Myfxbook

 

and

 

http://www.trading-challenge.com/pdf/Ranking.pdf

 

I like the Varengold contest a bit better because it just wasn't about the "highest equity wins" like most contests. They measured risk-adjusted returns, which is why 3rd place winner only had 20% total gain That doesn't stop most people from using "all in" type of strategies to get ahead. A demo account, but good enough to see the possibilities. And varengold even allows the winners to trade real money afterwards.

Edited by 4EverMaAT

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It's as easy as moving the decimal point over.

 

I am with gosu.....it seems easy, but once again most people cannot do it or they change their attitudes when they get to a certain $ limit.

The easy way to look at it is in percentages, but its very different to think - "oh sh..t - I just lost a nice dinner/holiday/car/house/small country today"

There is a certain talent some people have to be able to shove the $ amount aside mentally and just trade.....for some getting bigger is all they want to do, for others it affects them.

(SIM trading does not count in any form - you may as well be playing monopoly)

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- you could flip a few thousand ES contracts back and forth all day with no problems (someone please correct me if I am wrong about this).

 

BlueHorseshoe.

 

If you read the congressional findings about what happened during the flash crash, you'll see that the impetus was a 75,000 contract order that was entered abnormally. The normal method would have been to enter it taking into account time and price, but it was entered during a relatively low volume period and I am pretty sure it was a market order.

 

A thousand contracts is large size, you would cause a stir if you dropped a large order in. If it was a limit sell order and other traders perceived that it was real, then they would pull their bids,others would lower their offers; the market would drop. With supply overhead, the market likes to deal with that at lower prices. Unfortunately, I can't demonstrate this since I cannot trade a 1000 lot order. .

 

I agree with the basic premise that it is not easy to make the percentages that these guys talk about. You can always go back and find a strategy that would have produced a 3% return consistently over many months daytrading, but it won't work on a forward basis.

 

On the other hand, if you are a longer term trader trading in the futures markets and you catch a trend and you use leverage to your advantage, you can certainly average much greater than 3% or even 20% a month if you catch a nice trend. But that is not equity that you can pull from your account during a trade and there will be weeks or months that will be negative while the market takes a breath during the trend.

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Hi, wrbtrader,

Man, hahaha so true. To become a succesful trader my biggest challenge was not to find a winning strategy and developing a trading plan (seriously, thats the easy part). For me it was figuring out a strategy AROUND my family life. Got 3 kids , two go to private school and one little one (11 months) demanding attention 24/7 . The wife also works so half the time i'm changing diapers and looking at the charts at the same time. The single dude living at his parents house has such a huge advantage (only a shame you realize that when its too late and paying bills like there is no tomorrow hahah).

Sorry, didn't want to get off topic here but i guess there are traders out there that know exactly what i'm talking about. "How to be a trader and having a family life" could be a good title for a whole new thread. ;)

 

First, just want to say something quickly about TA. Every profitable trader I've met that uses technical analysis regardless if its via indicators or without indicators...they aren't only using TA to be consistently profitable. In contrast, they also are very dependent upon money management, proper capitalization, position size management, proper trading environment, proper trade strategy for their trading instrument(s), team collaboration, stress management and many other variables. Simply, their profits are dependent upon many different variables working together with their TA. Thus, I've never met a profitable trader that exclusively uses TA while ignoring all those other variables I've just mentioned.

 

With that said, getting back to the realistic expenses as a trader. First, I'm talking about retail traders that trade from home with their own money. I'm not talking about the corporate trader that's on salary and gets Christmas bonuses.

 

Yeah, the single retail trader has it sweet in comparison to the retail trader that has a family to support...more of a reality for the older traders (> 35 years old) and is the main reason why you'll see more young traders in comparison to older traders (> 35 years old) at prop firms. Yet, this is reality for any self-employed business owner...a lot easier to compound the income when single in comparison to when having a family.

 

I remember a long time ago while in an office being rented by traders in Seattle, Washington. The father of one guy came to the office to visit and to spend the day with his son (24 years old) to become more aware of what we do. I remember the strange look we gave him when he asked about our health plan, dental plan, pension plan and such...everyone of us thought he was speaking some foreign language never heard before. :rofl:

Edited by wrbtrader

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Ho hum, theoreticals are great for university settings.

 

Too bad my dad died many years ago otherwise I'd hit him up for a few mil so I could smack the S&P guys in Chicago half way to Shanghai. :roll eyes:

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Ho hum, theoreticals are great for university settings.

 

Too bad my dad died many years ago otherwise I'd hit him up for a few mil so I could smack the S&P guys in Chicago half way to Shanghai. :roll eyes:

 

sorry to hear about your Dad - make him proud -- you still can in SIM

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sorry to hear about your Dad - make him proud -- you still can in SIM
Nah I prefer the real deal. Walk the walk and not talk the talk of trading waaay beyond the level of someone posting on Traders Lab. :haha:

 

Not directed at yourself btw.

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If you read the congressional findings about what happened during the flash crash, you'll see that the impetus was a 75,000 contract order that was entered abnormally. The normal method would have been to enter it taking into account time and price, but it was entered during a relatively low volume period and I am pretty sure it was a market order.

 

It's unclear what you mean by the order being entered "abnormally." The large seller used a sell algorithm that was programmed to feed orders into the ES that targeted 9% of the prior minute's volume without regard to price or time. Such an algorithm doesn't strike me as "abnormal."

 

A thousand contracts is large size, you would cause a stir if you dropped a large order in. If it was a limit sell order and other traders perceived that it was real, then they would pull their bids,others would lower their offers; the market would drop. With supply overhead, the market likes to deal with that at lower prices. Unfortunately, I can't demonstrate this since I cannot trade a 1000 lot order. .

* * *

 

I too have never entered a 1000 lot order. However, daily observation tells me that your statement is inaccurate. If the 1000 lot order takes liquidity, there will likely be some minor slippage depending on the time of day. For a limit order, routinely there are DOM "walls" in the thousands on both sides of the market at any given time and there is no way to know if someone is waiting in the midst with a 1000 lot order. Also consider that GLOBEX allows sizes to be "hidden" behind a smaller number.

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It's unclear what you mean by the order being entered "abnormally." The large seller used a sell algorithm that was programmed to feed orders into the ES that targeted 9% of the prior minute's volume without regard to price or time. Such an algorithm doesn't strike me as "abnormal."

 

 

 

I too have never entered a 1000 lot order. However, daily observation tells me that your statement is inaccurate. If the 1000 lot order takes liquidity, there will likely be some minor slippage depending on the time of day. For a limit order, routinely there are DOM "walls" in the thousands on both sides of the market at any given time and there is no way to know if someone is waiting in the midst with a 1000 lot order. Also consider that GLOBEX allows sizes to be "hidden" behind a smaller number.

 

if you added 1000, it would be 1000 more than what you are already observing. It wouldn't set off a flash crash, but it would cause movement, slippage if you wish.

 

Re: the 75k sell order.

 

The execution of this sell program resulted in the largest net change in daily position of any trader in the E-Mini since the beginning of the year (from January 1, 2010 through May 6, 2010). Only two single-day sell programs of equal or larger size – one of which was by the same large fundamental trader – were executed in the E-Mini in the 12 months prior to May 6. When executing the previous sell program, this large fundamental trader utilized a combination of manual trading entered over the course of a day and several automated execution algorithms which took into account price, time, and volume. On that occasion it took more than 5 hours for this large trader to execute the first 75,000 contracts of a large sell program. 6

However, on May 6, when markets were already under stress, the Sell Algorithm chosen by the large trader to only target trading volume, and neither price nor time, executed the sell program extremely rapidly in just 20 minutes.

 

http://www.sec.gov/news/studies/2010/marketevents-report.pdf

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* * *

Re: the 75k sell order.

 

The execution of this sell program resulted in the largest net change in daily position of any trader in the E-Mini since the beginning of the year (from January 1, 2010 through May 6, 2010). Only two single-day sell programs of equal or larger size – one of which was by the same large fundamental trader – were executed in the E-Mini in the 12 months prior to May 6. When executing the previous sell program, this large fundamental trader utilized a combination of manual trading entered over the course of a day and several automated execution algorithms which took into account price, time, and volume. On that occasion it took more than 5 hours for this large trader to execute the first 75,000 contracts of a large sell program. 6

However, on May 6, when markets were already under stress, the Sell Algorithm chosen by the large trader to only target trading volume, and neither price nor time, executed the sell program extremely rapidly in just 20 minutes.

 

http://www.sec.gov/news/studies/2010/marketevents-report.pdf

 

Some time ago I posted a couple of docs and the link to the report you cite as recommended reading to another poster. I've studied the reports concerning the flash crash closely and am familiar with your quote.

 

If you meant in your prior post that the order was "abnormal" in its size, I would agree and the report bears that out. However, your post stated that the order was "entered abnormally" and also went further that "the normal method would have been to enter it taking into account time and price...."

 

Nowhere does the report state that the use of the sell algorithm itself is "abnormal." An algorithm that targets a percentage of previous volume seems rather "normal" to me.

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Some time ago I posted a couple of docs and the link to the report you cite as recommended reading to another poster. I've studied the reports concerning the flash crash closely and am familiar with your quote.

 

If you meant in your prior post that the order was "abnormal" in its size, I would agree and the report bears that out. However, your post stated that the order was "entered abnormally" and also went further that "the normal method would have been to enter it taking into account time and price...."

 

Nowhere does the report state that the use of the sell algorithm itself is "abnormal." An algorithm that targets a percentage of previous volume seems rather "normal" to me.

 

My post was entered quickly and was contextually poor. It was striking to me that it took a lot more time to fill the order the last 2 times a trade of that size occurred. So it was unusual and the fill was unusually quick. Also, 75K contracts is generally around 5% of volume. So large, but seemingly not too large.

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* * *It was striking to me that it took a lot more time to fill the order the last 2 times a trade of that size occurred.* * *

 

Different algorithms, probably targeting price and/or time and not just volume as in the case of the 75K seller on May 6.

 

It's apparent that the 75K seller on May 6 was in more of a hurry. A footnote states that on a later date the same seller took more than 6 hours to offset its short position taken on May 6, no doubt using a different algorithm.

 

You are right that 75,000 is not great volume. The report states that the initial selling by the algorithm was absorbed by HFTs, arbitrageurs, and other buyers. Then the HFTs began selling in concert and triggered heavy volume which fed back to the algorithm to sell even more heavily because it was targeting volume only. For me, one of the interesting take-aways from the report is that more volume does not necessarily equate to more liquidity!

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I think you get my point.

 

You must be single and/or with no family and/or not the primary wage earner ?

 

I do get your point, WRBTrader. Although personally I can't quite understand why anyone would choose to put themselves in the position you describe.

 

In answer to your question:

 

Single = true. No family = true. Not primary wage earner = false. But I have a dayjob so I'm in no way dependent upon my trading profits.

 

There's almost no point discussing it on here though - everybody has their own unique set of circumstances and priorities to work through. And everybody makes choices. If those choices are to put other people around them before themselves, then there are always consequences to doing so. And if those choices are always to benefit their own wellbeing, then there are consequences to that as well . . .

 

BlueHorseshoe

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Has the identity of the 75K seller been revealed?

 

BlueHorseshoe

 

Not to my knowledge. No doubt it is a large fund that likes to enter its own orders in the futures market to hedge its equity holdings.

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