A path towards profitability
- Thread starter garachen
- Start date
Ah, still hope for the nimble fingered click trader then
Imho it's getting pretty instrument specific these days, toward the less liquid end of things.
Did that happen often throughout the trading day? I have zero knowledge of futures, but is there something on the tape that hint to you the presence of manual traders at specific time? With stocks, I also feel that some big players are pushing prices up and down frequently intraday. Many times it feels like big players against big players. In your case, how often do you get countered by another big player pushing price the opposite way you're attempting to? And how do you prepare for that? (Please feel free to leave any questions unanswered. Basically, I'm trying to learn the thinking of big players in general.)
Thank you for any input.
Manual traders for the most part at extremes expect mean reversion and are surprised when it doesn't happen. At extreme moves you can sometimes tell roughly what the sense of panic is - how many people are just looking for that small pullback to get out. When that pullback doesn't happen things get interesting.
People tend to underestimate extremes. Going in 100% when the move is only 50% done.
That and you can tell the level of market maker exhaustion.
Flash crash was a dramatic example of market maker exhaustion and toxic order flow.
Are you saying that your "bread and butter" every-day-trading is not mean reversion?
Because that would be interesting...Quote from Rationalize:
Are you saying that your "bread and butter" every-day-trading is not mean reversion?
Why? RTM trading is only a small part of the total. Most trade directionally, along the trend. Actually, RTM trading is very risky IMO. Especially in the era of QE(n).
If you trade large size for a few ticks and you don't do that along the trend, one day you will be ruined I guarantee that to you, when the market will gap against you a few points and you won't be able to average your position along the trend for breakeven or small loss if you are lucky.
@rationalize, @intradaybill
Rationalize does have a point. Low fee, high frequency trading companies run almost entirely mean or model reversion strategies which can be profitable every day or at least every week with a high degree of confidence. While trend following is mostly done by CTA's or retail traders.
I, too, would love to find a general trend following strategy that would fit in with my environment.
What I was referring to is that when mean reversion breaks down it can be pretty spectacular. There are certain times where watching the market you can tell that mean reversion is as about to break and you will get an out of control panic on a contract. If you can detect this moment early enough you can generally do quite well by going with the panic and exiting as soon as it is out. It's a very specific, somewhat rare event.
Rationalize does have a point. Low fee, high frequency trading companies run almost entirely mean or model reversion strategies which can be profitable every day or at least every week with a high degree of confidence. While trend following is mostly done by CTA's or retail traders.
I, too, would love to find a general trend following strategy that would fit in with my environment.
What I was referring to is that when mean reversion breaks down it can be pretty spectacular. There are certain times where watching the market you can tell that mean reversion is as about to break and you will get an out of control panic on a contract. If you can detect this moment early enough you can generally do quite well by going with the panic and exiting as soon as it is out. It's a very specific, somewhat rare event.
lol .. seems every profitable shop is into virtual or actual market making in one form or another.. with varying degrees of intraday dirty hedging.
garachen,
I am curious about your experience in trying to find suitable traders. I'm guessing that you don't experience the 90+% failure rate from your applicants, unlike the results that would normally be seen at many prop firms. How successful were you at finding the right traders?
I'm also guessing that you try to teach your traders tape reading skill for the manual part of your business. From your experience, is it a skill that can be easily adopted? (i.e. Anyone that you teach can develop the feel within a year?)
Also, how do you keep a good trader from leaving your firm to trade on his own account?
I am curious about your experience in trying to find suitable traders. I'm guessing that you don't experience the 90+% failure rate from your applicants, unlike the results that would normally be seen at many prop firms. How successful were you at finding the right traders?
I'm also guessing that you try to teach your traders tape reading skill for the manual part of your business. From your experience, is it a skill that can be easily adopted? (i.e. Anyone that you teach can develop the feel within a year?)
Also, how do you keep a good trader from leaving your firm to trade on his own account?