Do you rely on your trading to put food on the table?

[mbondy]

When a trader puts in a buy order to be filled at the current offer he is said to be "taking". Also he is never eligible for a rebate if filled on the offer.

Some NYSE traders who strongly want a fill will enter their buy order a penny or two above the current offer because by the rules they must be given the best available price-- they are "taking liquidity" as well.


(When it comes to definitions, I try not to roll my own.)

This is not necessarily true.
If I use an inverse exchange,, I will be provided a rebate for taking liquidity (entering via market order). Alternatively, I could provide liquidity and use a traditional exchange to collect a rebate also.

Orders that are entered at an aggressive price (better than or worse than the nbbo) do not get any priority with respect to their position in the queue, so I don't know where you were going with that second example.

 

[southall]

I do not think there is any connection whatsoever to balance if one trades correctly.

Your account balance (or overall funds available to you for trading) dictates the sensible level of maximum risk/bet size
And if you want to compound your profits you should connect your bet size with your account size as well. So your bet size grows as your account grows.
If you are not interested in compounding your account higher then there is no reason to connect your bet size to your account size.

 

[mbondy]

Other than rebates (if that’s your thing, my broker doesn’t even offer), why would you care if you take or provide liquidity? I don’t trade to be a mm.

Traders provide liquidity both for rebates and more importantly to ADVERTISE LIQUIDITY. If I enter the market via market order or in a dark pool or via iceberg, my order is never fully displayed. Large traders who want to buy or sell large size do well to advertise their orders to others for the purpose of attracting interest - then, they get a rebate to boot. Win win.

Sadly, a lot of the advertised liquidity is not actually liquidity these days... it's more like phantom liquidity - when you go to reach for it, it disappears, because it was never really there. Herein lies the crux presented by high frequency trading to the real marketplace.

 

[ElectricSavant]

You can accomplish a much more robust compounding with the trade management that I suggest not money management based on balance...

Many profitable traders withdraw funds based on a static balance anyways...there is no growth...(don't risk your own money)

But I understand this is ET and these concepts are hard to grasp as there are not any profitable traders here.

ES

Your account balance dictates the sensible level of maximum risk/bet size
And if you want to compound your profits you should connect your bet size with your account size as well. So your bet size grows as your account grows.
If you are not interested in compounding your account higher then there is no reason to connect your bet size to your account size.

 

[Abundance Magnet]

I don't rely on trading to put food on my table. That's a dangerous mentality and I would never trade with that mentality. It took some time to get consistently profitable as a trader (still lots to learn as it's a constant evolving process) and I believe anyone can do it. Trading is mostly mental. Resilience, commitment and humility are the key in my opinion. (all of which are rarer traits these days but are totally developable skills) The biggest thing I've noticed is that ppl don't want to put in the work. I think that is a function of our instant gratification society. Trade fails, I quit, make money some other way. (lose money gain, rinse and repeat).

 

[southall]

You can accomplish a much more robust compounding with the trade management that I suggest not money management based on balance...

Once you reach your margin limits you can only increase your size further as your account balance grows.

The two are connected, there is no getting around this.

The only time the connection is not important is if you have the maximum balance you ever want and you only ever want to remove profits and never re invest them.

 

[ElectricSavant]

There was a late edit to my post that you quoted. I think we are actually agreeing...

ES

Once you reach your margin limits you can only increase your size further as your account balance grows.

The two are connected, there is no getting around this.

The only time this is not important is if you have the maximum balance you ever want when you start out and only ever want to remove profits and never re invest them.

 

[southall]

There was a late edit to my post that you quoted. I think we are actually agreeing...
ES

1)A trader who never increases his bet size is effectively trading with a fixed account size.

2)A trader who wants to compound profits has to connect his balance with sizing.

Telling trader 2) that strategy 1) is prefered or better for him is not correct. His strategy is the best strategy he needs to use if he wants to compound his account and increase his bet size.

 

[tiddlywinks]

Many profitable traders withdraw funds based on a static balance anyways...there is no growth...(don't risk your own money)

Exactly correct.

The only time the connection is not important is if you have the maximum balance you ever want and you only ever want to remove profits and never re invest them.

Generally, increases in account size come from "personal" funds (which were paid as salary/wages out of the account), rather than profit accrual inside the account. "Never" reinvest profits is a bit overboard though.

 

[southall]

Generally, increases in account size come from "personal" funds (which were paid as salary/wages out of the account), rather than profit accrual inside the account.

What difference does it make if the money comes from outside or from profits?