'I Have A Dream'- to all futures traders

limitdown · Nov 10, 2010

Quote from limitdown:

very noble thought and challenge / invitation

as one stated even 10,000 / 30,000 in ES means nothing.

let's practice

ok?

here's $100,000,000

that's 100 million.

how will you allocate it?

keep in mind that some idiot with $2.4 billion hit the ES market and caused / contributed heavily to the one day blip.

ok, enough time (that was in real time mind you)

you would use the full size, pit traded contract so as to hid your true origin and source of funds / participation, NOT the ECN(s).

you would leverage no more than 60% of your active position in front markets (not to be confused with front contract traded month)

you would use your remaining 40% in reserves (that's all that I will say for free on these threads)

now, with those parameters, go and recalculate your disbursement of funds into trading vehicles (contracts, positions, etc.)

PS. I like the reference to M.L.K.

Spike Trader · Nov 10, 2010

Quote from cap'ncod:

Question: what is stopping 1000 retail traders 'clubbing' together, forming a co-operative base and having a sizable presence in the market. We all know the order book manipulation and the sheer power advantages of being a large institution, so why not have a CTA or algorithm trade 1000 segregated accounts linked to trade 1000-3000 contracts at a time. What is stopping this? Legislation? Mr a no longer trades against mr b they trade together against their real competitor- the banks. All intelligent responses will be welcome.

I have just one condition, Under no circumstances must we allow Cramer or Madoff into the club.

Bolimomo · Nov 10, 2010

Quote from cap'ncod:

Accepted. But if you applied that rationale to anything complex nothing would ever be achieved.

I think the logistics will be a nightmare.

Are you going to have an "All or None" order for every trade?

Let's say you post 1000 contracts to long (or short). 700 contracts got filled. The market ran away. Then you cancel the remaining orders. Place an order to exit 700 contracts at a profit. But... only 300 contracts got filled. The remaining 400 contracts... let's say you got them out at a loss.

So how can you explain to your investors. On the same trade:

300 of you got a nice profit.
300 got nothing (no order).
And 400 of you got a loss.

How do you manage that? You put them on a round-robin schedule to trade?

And your fund prospectus will say: your performance may vary according to your luck?

nLepwa · Nov 10, 2010

Quote from cap'ncod:

Question: what is stopping 1000 retail traders 'clubbing' together, forming a co-operative base and having a sizable presence in the market. We all know the order book manipulation and the sheer power advantages of being a large institution, so why not have a CTA or algorithm trade 1000 segregated accounts linked to trade 1000-3000 contracts at a time. What is stopping this? Legislation? Mr a no longer trades against mr b they trade together against their real competitor- the banks. All intelligent responses will be welcome.

Investor size (measured in $) is distributed according to power law.

Pooling retail investors increases size linearly. You will remain in the heavy-tail part of the distribution.

Ninna

cap'ncod · Nov 11, 2010

Quote from nLepwa:

Investor size (measured in $) is distributed according to power law.

Pooling retail investors increases size linearly. You will remain in the heavy-tail part of the distribution.

Ninna

Interesting. Could you explain/ give examples. Thanks.

intradaybill · Nov 11, 2010

Quote from cap'ncod:

Question: what is stopping 1000 retail traders 'clubbing' together, forming a co-operative base and having a sizable presence in the market. We all know the order book manipulation and the sheer power advantages of being a large institution, so why not have a CTA or algorithm trade 1000 segregated accounts linked to trade 1000-3000 contracts at a time. What is stopping this? Legislation? Mr a no longer trades against mr b they trade together against their real competitor- the banks. All intelligent responses will be welcome.

Something that (I think) nobody mentioned: decision process, who is going to decide what? How are you going to put 1000 people to decide what system to use, risk management, etc? What about if you have to change brokerage and 50 of them do not like the new one?

This points to management, a few that make the decisions. As soon as you do that you have your typical (hedge) fund.

Answer: nothing is stopping you. Just find a good fund and invest your money there. I also noticed Ninna gave you another good reason against it. You seem not to understand why. Simple, Ninna just made it too mathematical. If each retail trader has 10K you get 10 Million with 1000 people. The average size of a medium-size fund is 100 Million. You are still a small fish. They will chase you around and move you like the wind does to a leaf.

limitdown · Nov 11, 2010

Quote from nLepwa:

Investor size (measured in $) is distributed according to power law.

Pooling retail investors increases size linearly. You will remain in the heavy-tail part of the distribution.

Ninna

explain those terms,

they are not in the common nomenclature, and are often used by those who think they are sophisticated, and hence clone phrases to quantify simple concepts

power law?
heavy-tail?
distribution?

wow, for 95% of the participants and idiots who participate on these threads you talked way over their heads...

intradaybill · Nov 11, 2010

Quote from limitdown:

explain those terms,

they are not in the common nomenclature, and are often used by those who think they are sophisticated, and hence clone phrases to quantify simple concepts

power law?
heavy-tail?
distribution?

wow, for 95% of the participants and idiots who participate on these threads you talked way over their heads...

What you do not understand about gravity? Ninna spoke in the language of math to simply tell you that 20% of the people control 80% of the cash in this world. No matter how many retail traders you pull together, rich people will overpower them.

http://en.wikipedia.org/wiki/Pareto_distribution

http://en.wikipedia.org/wiki/Pareto_principle

These are now high school subjects. Do you want to say that you did not go to high school?

cap'ncod · Nov 11, 2010

Quote from Algo_Design_Kid:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=209196

Thanks for finding this. Interesting read. Highlights the mentality of many traders; their dreams and the pusruit of them even to self destruction. Also, the flaws with trusting human traders and their lack of consistency in performance. I hate to say this really, but I'm sure building intelligent algo systems is the way to go. It's also, future proof (if anything can be today) in so far as the human aspect of trading is diminishing.

cap'ncod · Nov 11, 2010

Quote from Bolimomo:

I think the logistics will be a nightmare.

Are you going to have an "All or None" order for every trade?

Let's say you post 1000 contracts to long (or short). 700 contracts got filled. The market ran away. Then you cancel the remaining orders. Place an order to exit 700 contracts at a profit. But... only 300 contracts got filled. The remaining 400 contracts... let's say you got them out at a loss.

So how can you explain to your investors. On the same trade:

300 of you got a nice profit.
300 got nothing (no order).
And 400 of you got a loss.

How do you manage that? You put them on a round-robin schedule to trade?

And your fund prospectus will say: your performance may vary according to your luck?

Thanks for posting, Bolimomo. You've exmined a detailed scenario regarding order transmission/ cancellation etc. Even the number of contracts. In my opinion, this would all have to be done by algos and it would be done much faster than any of us guys can do it now. The room for error would be hugely reduced. I'll post more on what I think the benefits are later. I'll also look at how profits could be allocated and participation by co-op members utilised.