I’d like to answer some questions.

[garachen]

That’s a really good question. I thought about a few different things but would need more information. If you want to talk, PM me and I’ll call you. Otherwise, best I can say is this.

Well, I wrote stuff I deleted because I just don’t know enough about what you are trading. So now I’ve looked at prior posts and see mostly equity options. I do know for sure that there’s decent manual edge there. I don’t trade equity options myself but a few guys at my firm do. From what I understand is that it’s important to match the trade with the vol environment. They have four classes of trades and switch between them as the vol curve changes.
So, I’d say, be flexible in strategy selection.

 

[qlai]

They have four classes of trades and switch between them as the vol curve changes.

Can you please elaborate without giving anything away?

 

[cesfx]

I ‘retired’ from this site a few years ago but like to check in the first two weeks of each year to see if there’s anything new being discussed.

My very brief introduction is that I quit my job and started trading full time in 2006 with 100k capital. I first broke $1m in total trading profits by late 2007. I invested more in tech and trading relationships over the next decade and for the most part things have gone well. I trade a lot and I talk to other traders all day every day who also trade a lot.

This forum is pretty funny. Mostly noisy but every so often there’s a million dollar piece of information that someone will just randomly and inadvertently post. Much fewer now but it’s still fun to look.

I’d like to take a few interesting trading questions if that appeals to anyone. I didn’t see a current thread that immediately jumped out to me.

I know a lot about most trading things. Probably the least about equity options but if it’s a good question I definitely know someone I can get an answer from.

I’ll start off with what I see as the biggest hurdles retail traders face when starting.
1) lack of specialization. There’s really not a thing called ‘trading ES’ for an individual. ES is a team effort. Individuals should start with something very narrow like summer Natural gas time spreads (not a recommendation). That’s a product thats manageable by an individual who then after several months of consistent profits might expand to winter NG spreads. Product selection is important.

2) fees matter. If you don’t know your fees or what other people might be paying then you just don’t care enough.

3) Low goals / expectations. Trading is not a means to ‘support’ a family. I’m not even sure I could actually think of a worse way to accomplish that goal. Trading is all or nothing. As a potentially successful trader you will need to be quite smart. Your opportunity cost for not taking a job or starting a different type of business is enormous and you’ve traded it for a high risk high reward binary option. As time drags on that option premium you pay gets more and more expensive. In almost every case, if you aren’t making money 8-9/10 days by 6 months in you really need to quit trying and do something else. It’s very unlikely that trying more will bring a different result.

4) realize that even as things go even more electronic and people complain about HFT - hft profits are measured in a small percentage of a trading increment. The big / massive edge is still mostly manual or also in signal based trading in specific environments. There’s a lot of edge in opaque markets so if you feel like you are really in the weeds of things like delivery schedules, regulation impact, etc there’s a good chance you are doing something correct. Find things the algos can’t do.

Thank you for the contribution.
I am curious about what were you trading in 2006-2007 when you switched full time and had a great first year, and what made it so great in terms of return.

 

[garachen]

Thank you for the contribution.
I am curious about what were you trading in 2006-2007 when you switched full time and had a great first year, and what made it so great in terms of return.

Vix futures and calendars. There was some guy who would blow through the very thin book with market orders a few times a day and you could market make and fill several thousand dollars out of market.
No idea how he could blow that money everyday. Oh. And also there were good opportunities at the reopen. Since future back then actually had an open... when ES moved at open, the vix passive orders wouldn’t always pay attention and you could take them out easily.

actually, I’m not sure that’s what you were asking. “What made it so great in term of return”. I’d say, first. Never think of trading in term if return. I’ve never asked anyone for their return because it’s a nonsensical number in trading. Traders should know best day. Worst day. Best and worst month. Worst day / average month. Max margin, average margin. Dollars per year. Trades per day. Those are questions that are important. Underlying capital used can be measured many ways and in futures can change enormously day by day. And can also be massively different day verses night. And if you are at a trading firm, often you’d really have little idea what your capital consumption might be.

Sorry this is a pet peeve of mine. People here seem to think you can test veracity by dividing nonsensical numbers and saying things aren’t possible. Which is really ignorant. On capital of 100k at a pretty standard clearing firm, making 300-500 per year now solo is reasonable. But you change that to 100m and say you make 300-500m. Well, possible but you’d be employing completely different strategies on completely different products to achieve that. Definitely not a 1 man operation doing a risk adverse trade. And, there are really only 3 classes of strategies that can do that and it’s pretty well known who does what.
More money than that adds further constraints.
Wow. I’m still not sure I answered the question but done ranting.

 

[garachen]

Can you please elaborate without giving anything away?

Sadly, I cannot

 

[Laissez Faire]

Pretend you are a new hire at Jump or HRT or Tower as a jr trader. A) how much ‘training’ do you think highly compensated people are going to be giving you B) how long do you hang around while not making money. I don’t have direct knowledge of A because I don’t work there but I’ve seen enough to make a pretty good guess on that answer. And B I know for sure. There’s not a significant amount of ‘magic’ in the corporate structure that you couldn’t have learned in 2-3 decent conversations outside the structure. In regards to finding something profitable. The things you’d look for would be different but the effort is about the same.

A) No idea, but I would not imagine anyone being left to their own or expected to figure out the markets on their own.

In the recent Schwager book - one trader who was hired at a London based trading firm said he started out with a 2 month training program. Classroom style. Following that - 6 months of simulator training.

B) I do not think they were paid a flat salary, but one of the guys who were struggling to meet ends, but profitable after a year, was actually allowed a salary such that he could be able to eventually figure it out. And it seems like he did.

I don't know much about the industry at all, but what you're saying is simply different from what I thought and heard/read elsewhere, so it's quite possible I'm flat out misinformed.

I guess I know a few ES traders who started early enough that they can still make it trading on their own. But the career path has been. 5-10m solo 20ish years ago. 100+ m with team of 8-12. 2-3 million solo again after retiring with way more capital than they had before.

so I’m not bullish on the trajectory and I don’t think it’s a viable starting point for people nowadays.

This is intriguing. How would you say ES is different today compared to those who started "early enough"?

I've talked to several experienced long term ES traders. One says he feels it's pretty much the same. Another shares some of my own observations, i.e., more false breakouts/sharp reversals, etc.

And specifically what do you mean by trading in a team? A co-operation with regards to research and implementation or various strategies?

 

[garachen]

Ok. I think 2 things are getting conflated.
What you are describing. No salary, possible desk fees, ‘training’ let’s agree to call a trading arcade. Those used to be way more common in the US and I think still exist in Europe.
Pretty much the opposite: good salary, no desk fee, less ‘training’ let’s call a trading firm.

Working at a trading arcade isn’t so much a job as a (scam seems to be the right word almost..) ‘golden opportunity’. I have to be careful here because the modern version of this has improved enough to where there are a few legit versions there that are not a waste of time. And my friend runs one.

when you’ve seen a product mature from little electronic to almost all electronic / algo driven it’s way easier to recognize the patterns that work. Because you saw them ‘naked’.

 

[cesfx]

Vix futures and calendars. There was some guy who would blow through the very thin book with market orders a few times a day and you could market make and fill several thousand dollars out of market.
No idea how he could blow that money everyday. Oh. And also there were good opportunities at the reopen. Since future back then actually had an open... when ES moved at open, the vix passive orders wouldn’t always pay attention and you could take them out easily.

actually, I’m not sure that’s what you were asking. “What made it so great in term of return”. I’d say, first. Never think of trading in term if return. I’ve never asked anyone for their return because it’s a nonsensical number in trading. Traders should know best day. Worst day. Best and worst month. Worst day / average month. Max margin, average margin. Dollars per year. Trades per day. Those are questions that are important. Underlying capital used can be measured many ways and in futures can change enormously day by day. And can also be massively different day verses night. And if you are at a trading firm, often you’d really have little idea what your capital consumption might be.

Sorry this is a pet peeve of mine. People here seem to think you can test veracity by dividing nonsensical numbers and saying things aren’t possible. Which is really ignorant. On capital of 100k at a pretty standard clearing firm, making 300-500 per year now solo is reasonable. But you change that to 100m and say you make 300-500m. Well, possible but you’d be employing completely different strategies on completely different products to achieve that. Definitely not a 1 man operation doing a risk adverse trade. And, there are really only 3 classes of strategies that can do that and it’s pretty well known who does what.
More money than that adds further constraints.
Wow. I’m still not sure I answered the question but done ranting.

Thank you. I think I didn't use the right wording, my bad, not native speaker, but I understand well your point about return and expectation.
If I understand correctly you were trading future calendar spread on vix? I have tried to understand them but the vix itself is still a complex instrument for me.
What do you mean by taking out passive orders, filling them?

 

[traider]

Thank you. I think I didn't use the right wording, my bad, not native speaker, but I understand well your point about return and expectation.
If I understand correctly you were trading future calendar spread on vix? I have tried to understand them but the vix itself is still a complex instrument for me.
What do you mean by taking out passive orders, filling them?

He means there are limit orders placed by people who can't be bothered to adjust their orders when market is changing. They are sitting ducks for HFT

 

[rallymode]

Vix futures and calendars. There was some guy who would blow through the very thin book with market orders a few times a day and you could market make and fill several thousand dollars out of market.
No idea how he could blow that money everyday.

Still happening, though not as it used to back in the golden days. March - April period was glorious.

Greetings from the dark side