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This is the beauty of internalization. It is not obvious even to some experienced traders how they get fleeced. It is all about negative selection. The internalizing BDs and dealers that purchase order flow interact with it before it hits an exchange or ECN where your limit order sits...

Traders are cogs in the big mechanism for resource allocation called marketplace. History has shown that economic agents access to society's resources based on true price discovery is far more efficient than any central planning scheme even if the bureacrats concocting it were brilliant...

It is unfair to single out IB regarding this issue. The vague definition of "best execution" insures it is open season for "not too blatant" customer fleecing. Unfortunately the root of the problem is so to speak "in your face", embedded in the very word "broker-dealer". For as long as a...

sent you a PM

I have been using portfolio margining to trade for myself for the past five years and it has worked out great for me. The argument that you get autoliquidated in a pm account while with a JBO/ prop firm u are given some time to come up with money does not hold water for me. First of all...

Butterball, Could you redo your calculation by comparing: 1$ in the bank with interest compounded after paying taxes on interest each year (the highest marginal tax rate would apply to wealthy people), with the price of gold ($20 in 1930 -> $1500 in 2011) The published CPI is no good as it...

Assemble a statistical sample consisting of all the historical occurences of your setup. Make it as exhaustive as your resources permit. Check the worst case scenario that has unfolded in the past. Apply a leverage that makes that worst case comfortably below your pain threshold of 20%...

You need to use a proper measure of account to see through the currency debasement and confiscation of people's savings that ben unleashed in order to fund the deficit. Pricing the SPY in gold yields a different picture.

Yeah, it is the deficit spending that conjures money out of thin air. The fed only facilitates the process by using the primary dealers to indirectly monetize the debt.

don't you find it a bit ironic that after all these years they could not merge the specialist book with ARCA?

What most people miss when looking at internalization is that there are several traders involved. The customer sending a marketable order, the internalizing B/D and the trader(s) whose limit(s) is making up the NBBO. If the B/D uses no information regarding the customer (how informed he...

Sure, what I said is a naive two sentence parallel between poker and trading, but not that far fetched. Regarding the Phill Ivey's of trading sitting at your table: When you trade, you dont know who's on the other side of your trade. It could be Goldman's market making algo, Steve Cohen...

my 2c: if you are a successful poker pro (that is you paid your bills and grew your bankroll for many years without other sources of income) then you understand risk management and have the tough psychological makeup necessary to come back from drawdowns. Both will help you when trading...

I was hoping to hear some horror reverse engineering stories and get a feel as to how widespread the practice is. Unfortunately the people doing it have no reason to talk about it and the ones that were taken advantage of may not even be aware it was happening. I find promagma take as the...

There is not much you can do about that. The adverse selection you experience with you limit order is built into the fabric of the current market structure. You pay this cost to the traders (mostly large broker dealers, market makers, specialists and floor traders) that are allowed jump the...

The reason the realized PF and Sharpe are lower than their counterparts in the backtest is due to some unfortunate leverage decisions I made along the way, as well as various production screwups.

From the actual trades for 2009 (made money first 6 months, with the last 6 months flat) I get a daily PF of 1.4 and an annualized Sharpe of 2.0. Do not have the other stats. There is always the chance I was just lucky, and the strategy is simply a datamining artifact but the sheer number of...

(1) market traded very liquid NYSE and NASDAQ listed equities (think SP500 constituents) (2) timeframe of strategy day trading (no overnight) (3) for how long it worked the spreadsheet is a backtest permited by my database I went live in the middle of 2008 and the actual equity curve...

One of my strategies has been treading water since the middle of 2009. I find the following scenarios plausible and list them in decresing order of my estimate of their plausibility: 1. a regime shift in the market makes this strategy unprofitable for now, it may recover at some...

Dustin I have a couple of questions if you got the time: 1. What period in the past is the most similar to the environment you see today and how long did the dry spell last back then? 2. After the previous dry period, did the your methods start working again or you had to reinvent yourself ...