ES "Too Efficient"

T

tradertony76

Could someone explain to me what "too efficient" means ?

I often hear it in the context of "Don't waste your time trying to scalp the ES, that market is 'too efficient'"

The connotation I always hear it in is in regards to it being impossible to take money consistently out of a certain market.

What factors make a market "too efficient" ?

Thanks,
-T
 
Tony,
I think it means that there is so much volume there that this can hinder movements vs helping it. And I would agree with that statement 100%. I trade mainly the ES, NQ and EC. When the EC wants to trend, watch out! When the ES and NQ provide setups at the same time, most times my NQ trades will deliver profits while the ES is providing small profits. The setups can be identical, but the ES has so much volume out there that many more buyers/sellers must be taken out before a decent move can be had; whereas the EC and NQ can provide decent moves in a relatively shorter period of time. My best guess is that is simply due to the amount of volume in each particular market.

And for whatever reason, it seems that the ES is the e-mini of choice among many traders - pros and newbies - which can add to the equation as well.

It's kind of like poker - have you ever head a professional poker play say that they hate playing against rookies? The reason they typically give is that they cannot read the rookies b/c they don't play like the pro's do. Eventually the pro will probably win, but it's actually harder for them. With the ES volume around 1 million per day, there's obviously pro's and rookies playing there.
 
Haha, your statement assumes newbie trader can have influence in emini arena, what a silly comment. This is no true at all, them and their 1 lot not gonna make any difference in price, smart money moves or doesnt move ES not newbie trader.

-Harry

Quote from brownsfan019:


And for whatever reason, it seems that the ES is the e-mini of choice among many traders - pros and newbies - which can add to the equation as well.

It's kind of like poker - have you ever heard a professional poker player say that they hate playing against rookies? The reason they typically give is that they cannot read the rookies b/c they don't play like the pro's do.
More...
 
Quote from Harold Balls:
not newbie trader.
More...

Perhaps, but we newbies are out there contributing to the noise.

I think a lot of the 3-6 box "flushes" you see in the ES are the result of us newbies getting shaken out by the pros.


Brownsfan, thanks for the insight. Maybe the "too efficient" refers to as soon as the newbies slip up, those 3-5 ticks they've given up are snapped up within seconds by the pros ?
 
Tony:

Much of the commentary you hear is from amateurs.

Indexes tend to be noisy because of the number of participants and the various agendas. These participants have differing views of what constitutes "value". There are a lot of discussions about this subject, but the one that may be of most "value" to you, relates to Market Profile. Traders who use that approach argue that long term participants find often find value at the extremes of a range, while short term participants find value within the range hoping for a move to the extremes. You don't have to be an advocate of that method to learn something important from it.

As a practical issue, a noisy market requires that intraday participants adapt in various ways, including modification of stops, changes in entry strategies (like scaling in for instance) and changes in exit strategies (scaling out for instance).

Also there is the question of general strategy. I have traded short term momentum (intraday) for a long time now on indexes. While I am not willing to share the details, I will say that there is a lot of literature on that subject if you are willing to do some research.

I also buy and sell options on indexes so that I have a longer term position to trade around. This diversity helps me to overcome the short term volatility of returns.

I hope this helps somewhat

Steve

Tony you are right, retail traders tend to get "shaken out" and "stranded" (sudden spike against your position leaving you on the wrong side "hoping" that it comes back). knowing that it is happening, you should be putting risk management to work or modifying your approach so that your exposure is limited.
 
Quote from tradertony76:

Perhaps, but we newbies are out there contributing to the noise.

I think a lot of the 3-6 box "flushes" you see in the ES are the result of us newbies getting shaken out by the pros.
More...


Indeed, newbies are out there contributing to the noise. Especially when they get slaughtered they are very noisy.

:D :D :D
 
With retail trading and tv infomercials like investools and all that crap out there...theres lots of newbies with lots of cash trading away in these markets, seeing newbies with a million slosh 200 lots back and forth all day in the ES...makes one wonder if they have some impact on the market...perhaps that point of slippage everyone gets.
 
Quote from brownsfan019:

It's kind of like poker - have you ever head a professional poker play say that they hate playing against rookies? The reason they typically give is that they cannot read the rookies b/c they don't play like the pro's do. Eventually the pro will probably win, but it's actually harder for them. With the ES volume around 1 million per day, there's obviously pro's and rookies playing there.
More...

this is the most ridiculous analogy i've ever read. do you know any professional poker players who don't like to play against rookies? if you do, i strongly advise you to suggest to them that they reconsider their professional status.
 
I think he mean that newbie player in too many pots with bad cards, gets lucky and makes hard for advanced player to read them. But all pro poker player want newbie player in cause, over time, pro takes their monies. Pro knows how to set trap and newbie always walk in.

Quote from Pr0crast:

this is the most ridiculous analogy i've ever read. do you know any professional poker players who don't like to play against rookies? if you do, i strongly advise you to suggest to them that they reconsider their professional status.
More...
 
Quote from Harold Balls:

I think he mean that newbie player in too many pots with bad cards, gets lucky and makes hard for advanced player to read them. But all pro poker player want newbie player in cause, over time, pro takes their monies. Pro knows how to set trap and newbie always walk in.
More...
A pro LOVES to get bad beats put on him. WHY? Because a pro only cares about the expected value of his decisions, not the outcome. That's what I'm trying to say.
 
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