How are spreads better than hedges?

D

dv4632

Can someone give a brief answer to this please? Thanks.

Also, I keep hearing that no futures trading firms will hire you (nor will anyone else fund you) if you are an outright directional trader. It's spreads or hft.

Quote from another thread: "No one is going to give you money to guess market direction."

Why is this? Do they think directional trading can't be done, or is it that they think it's too risky? Just curious as I found it surprising, considering that all trader education is focused on teaching you to predict market direction.
 
Quote from dv4632:

Can someone give a brief answer to this please? Thanks.

Also, I keep hearing that no futures trading firms will hire you (nor will anyone else fund you) if you are an outright directional trader. It's spreads or hft.

Quote from another thread: "No one is going to give you money to guess market direction."

Why is this? Do they think directional trading can't be done, or is it that they think it's too risky? Just curious as I found it surprising, considering that all trader education is focused on teaching you to predict market direction.
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Since I think you quoted me I think I'll answer. I think spread trading offers more possibilities for highly intelligent people and makes better use of technology then simply pick up or down.

It kind of reminds me of an old quote. "Any man can go to war. A brilliant man will find a reason not to." War is a binary bet. There are thousands of permutations in which to avoid war. That is where the edge is.

Anyone can get long or short. It's finding the edge somewhere else that expresses the same point of view that is not as obvious that ultimately pays off the most.

Anyway, just my opinion. Firms and banks that back traders tend to like highly intelligent and creative people. Binary bets are often likened more to gambling.
 
To the poster, I wouldn't put too much credence in any of the "experts" here. I'm a primary directional trader and I received an offer for full backing. I wasn't able to accept it in my current situation.

Listen to everyone but trust nothing but what you verify personally.

I think your question is very valid. Going "outright" long is a spread too... long s&p 500/short us dollar. All the currencies are listed as pairs. Surely, plenty of people lose in the Forex market. So not so sure how spreads are going to help. I've a book here, "What I Learned Losing A Million Dollars" written by spread trader.

I like how Maverick presents a directional trade as a binary bet but spread trade as something different. So, Maverick, you're telling us that a spread trade isn't a win or lose proposition? I'd like to learn a method where its not possible to lose.

Now having said that, I do think that there are many ways to express any given sentiment/expression and I can see value in sometimes expressing those sentiments in terms of other relations. I also don't doubt that many Chicago firms are trading any of a multitude of relations.
 
Quote from dv4632:

Can someone give a brief answer to this please? Thanks.

Also, I keep hearing that no futures trading firms will hire you (nor will anyone else fund you) if you are an outright directional trader. It's spreads or hft.

Quote from another thread: "No one is going to give you money to guess market direction."

Why is this? Do they think directional trading can't be done, or is it that they think it's too risky? Just curious as I found it surprising, considering that all trader education is focused on teaching you to predict market direction.
More...

I'm sure if you look hard enough you will find some firms that are still backing directional traders. In fact there are some guys in my office that are backed and trade directionally(intraday). The firms that do this are probably going to be lower on the totem pole as far as the trading industry goes! I've interviewed at many of the firms here in Chicago and I can confirm that the "better" firms are HFT or spreading! Mav could elaborate more on this, but its a matter of risk and leveraging their strengths. Not to mention that spreads tend to be a more consistent way of trading from what i've seen.

As far as the "experts" on this board. Well...you have two people who responded to your question. One that is a successful trader and works in the industry. Another who got an "offer" to be backed and is paper trading out of his parent's basement! LOL take your pick.
 
Lucias has e-mailed me over 20 times asking me to back him. I politely gave him the names of several firms that back traders. He checked a few of them out and got back to me and said all they want are HFT traders. Go figure. I think he quit pre-maturely. I told him there were over 50 firms here in Chicago and he said why bother, they are all the same.

I've said this before all over ET, think about this question from the firm's perspective. Why would you need to hire 50 guys all making binary bets on the same instruments. At the end of the day, your firm's aggregate position is going to look like one big ES trade long or short when you net out all the positions. So what's the point? I mean honestly think about it and post back to me.
 
shanb the question was about prop backing.. I received an offer based at least partially on my directional trading experience for trading 100% backed an in-office proprietary firm. I didn't accept it because it didn't make sense for me.

The type of negativity/rudeness here is why I rarely post here anymore.

Quote from Shanb:

I'm sure if you look hard enough you will find some firms that are still backing directional traders. In fact there are some guys in my office that are backed and trade directionally(intraday). The firms that do this are probably going to be lower on the totem pole as far as the trading industry goes! I've interviewed at many of the firms here in Chicago and I can confirm that the "better" firms are HFT or spreading! Mav could elaborate more on this, but its a matter of risk and leveraging their strengths. Not to mention that spreads tend to be a more consistent way of trading from what i've seen.

As far as the "experts" on this board. Well...you have two people who responded to your question. One that is a successful trader and works in the industry. Another who got an "offer" to be backed and is paper trading out of his parent's basement! LOL take your pick.
More...
 
Quote from Maverick74:
Since I think you quoted me I think I'll answer. I think spread trading offers more possibilities for highly intelligent people and makes better use of technology then simply pick up or down.

It kind of reminds me of an old quote. "Any man can go to war. A brilliant man will find a reason not to." War is a binary bet. There are thousands of permutations in which to avoid war. That is where the edge is.

Anyone can get long or short. It's finding the edge somewhere else that expresses the same point of view that is not as obvious that ultimately pays off the most.

Anyway, just my opinion. Firms and banks that back traders tend to like highly intelligent and creative people. Binary bets are often likened more to gambling.
More...
+1
 
Quote from Lucias:


The type of negativity/rudeness here is why I rarely post here anymore.
More...

there was no rudeness there. I think Mav and others were just being brutally honest. Just because you hear what you don't want to hear doesnt make it rude !
 
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