Sounds like a good argument for a different trading style. Trying to scalp manually against HFT bots sounds catastrophic enough anyway.
Catastrophic event
- Thread starter Surprise
- Start date
Sounds like a good argument for a different trading style. Trying to scalp manually against HFT bots sounds catastrophic enough anyway.
Scalping ES (or any leveraged instrument) w/o being hedged is like playing russian roulette every day. Instead of playing the odds of eating a bullet (1 in 6) you play the odds of being taken out by a black swan (1 in a really large number).
You can prevent this by only shorting as the OP and surprise said or by buying OTM puts and rolling 15 days before expiry to preserve some time value as Intradaybill said (preferred way since you can participate on both sides of the market and not always feel like you're missing out). To reduce the cost of continually rolling, you can use SPX or ES options since the car size is bigger so you won't need as many compared to SPY (lower commissions) although the spread isn't as tight.
Or you could just not hedge and take the risk. But imagine one day you go to the fridge to get another red bull and come back to find your 2 point "disaster" stop blown through by a locked limit down ES. If it reopens down 10% you just lose 5k per car if ES is at 1000. To bottom line this, if you trade with 5k equity per car (a lot more than some aggressive traders on here do) you are now wiped out but not in debt to your clearing firm. Traders using 500 per car will be put on suicide watch. Sorry for the long post, just trying to pay it forward so your tombstone doesn't read "ETtrader was killed today by a black swan. He is survived by his 16 computer monitors."
You can prevent this by only shorting as the OP and surprise said or by buying OTM puts and rolling 15 days before expiry to preserve some time value as Intradaybill said (preferred way since you can participate on both sides of the market and not always feel like you're missing out). To reduce the cost of continually rolling, you can use SPX or ES options since the car size is bigger so you won't need as many compared to SPY (lower commissions) although the spread isn't as tight.
Or you could just not hedge and take the risk. But imagine one day you go to the fridge to get another red bull and come back to find your 2 point "disaster" stop blown through by a locked limit down ES. If it reopens down 10% you just lose 5k per car if ES is at 1000. To bottom line this, if you trade with 5k equity per car (a lot more than some aggressive traders on here do) you are now wiped out but not in debt to your clearing firm. Traders using 500 per car will be put on suicide watch. Sorry for the long post, just trying to pay it forward so your tombstone doesn't read "ETtrader was killed today by a black swan. He is survived by his 16 computer monitors."
remember when greenspan pulled that "surprise" interest rate slash back in "03 ( i think)? 60 point upside move in 5 minutes.
I had just closed a short position 3 minutes before this to make some lunch. standing in the kitchen I glanced at the machine and thought my data feed got corrupted. WTF? not likely today due to where rates are. almost 0. anywayyyyyyy..... why not just place a stop 5 points under your range? am I missing something?
I had just closed a short position 3 minutes before this to make some lunch. standing in the kitchen I glanced at the machine and thought my data feed got corrupted. WTF? not likely today due to where rates are. almost 0. anywayyyyyyy..... why not just place a stop 5 points under your range? am I missing something?
agree , the surprise could be to the upside , in case of your example of a sudden rate cut the price will jump gradually , fast yeah but gradually , i will suffer some slippage , but in case of a cat event markets will plunge maybe halt maybe will limit down , there is no guarantee i could close my position this is different , dont think ES only , think FDAX , TF ... etc
The answer is that you trade through a limited liability corporation or other non-recourse legal vehicle, and keep a minimum amount in your brokerage account; or you trade with sufficient capital/size ratio that all likely gap moves are within your survivable risk tolerance; or you buy options to hedge. Choose the most appropriate one for your situation.
Note that shorting is even more risky than being long, so that is a poor answer. There is nothing to say that the dollar does not devalue 75% overnight, sending the S&P up 300% in the process.
Note that shorting is even more risky than being long, so that is a poor answer. There is nothing to say that the dollar does not devalue 75% overnight, sending the S&P up 300% in the process.
IMHO Leveraged overnight trading is more risky than scalping and day trading as you are much more likely to see gaps/limit moves against you that blow through your stops (you do use live stop :eek )
This is not say you arent at wipeout risk with day trading, only the odds are much less.
I think it is Richard Dennis in the Market wizards books who says he had to close his hedge fund because of sharp overnight moves gapping through his intended exit points.
Did 9/11 hit day traders or overnight traders harder?
I sleep easy at night knowing i have no open positions.
This is not say you arent at wipeout risk with day trading, only the odds are much less.
I think it is Richard Dennis in the Market wizards books who says he had to close his hedge fund because of sharp overnight moves gapping through his intended exit points.
Did 9/11 hit day traders or overnight traders harder?
I sleep easy at night knowing i have no open positions.