Quote from Here2learn:
Thanks, all.
I think the main answer I was after had to do with the decision making process and the availability of resources used in that:
"Other than a large staff of employees, what resources do trading institutions have that are not available to the home trader?
NADA. Absolutely nada. If you plug in the numbers to the driving formula of making money, you see why these guys have nothing."
So, are you to tell me that institutions base their buy/sell decisions off the same support/resistance, volume, price action, indicators, trendlines, etc. that we use at home???
The information people use varies greatly. I felt that you were asking if the various resourses used gave the institutions something that was an advantage not available to amatuers or retail.
For me, and I may be ridiculed in the future but no one has criticised me as yet, resources for making money come down to dealing with the compound interest formula.
Institutions use it and retail uses it.
For some reason institutions go for giving commissions and fees to people who make the intial capital as large as possible. This is not a powerful thing to do, it seems. The institutional people then have to deal with the exponent and the prfit per cycle to get the final captal to be different from the initial capital.
What is handy for using these two variables for institutions and for retail?
Having lunch was mentioned and so maybe were fleet of foot messengers during war ends. Getting deals applies apparently.
I crank up the turns meaning the exponent. By trading the ends of segments on faster fractals I believe there is an advantage that retail has over the institution. Ends of segments are different that ends of imbalances. Segments are price movements and they are big compared to imbalances.
By going from 4 to 7 to 15 to 20 to 40 segments a day, you get to do more net capital gain.
The profit per segment goes down though. It is not too important in the formula compared to the exponent's power.
So what information is used by institutions to affect the exponent and the profit per turn. As I see it, market information used by institutions is not used effectively to make money about none of it changes the exponent or the profit per turn.
By looking at annual returns of retail and institutions, there is no comparison.
What I see is the compound interest formula relating to the daily ATR. The ATR is an outer band of the many profit segments that occur during the day. You compound within the day and daily. Within the day a segment of profit is a small percent but the exponent is up to 40. Daily you get a multiple of the ATR which is a nice leveraged percentage and that happens about 240 times a year.
To look at the daily initial capital is fun because each day it gets bigger. For institutions it is determined by looking in the mail and looking at the issues and redemptions and the capital profits per day less daily expenses. this is almost nothing compared to the intial capital.
By compounding it all year, the institution may make 30% commonly on capital.
Lets look at the individual. He has a multiple of the ATR and it is leveraged by margin also. An ES trader is looking at so many contracts and per contract, points are made daily by adding profit segments.
Look at 40 segments of some small point length. Look at the margin in points. Compare. This gives you a percent to put in the formula and it is repeated 240 times a year.
So I feel knowing the timing using market information to do 40 segments is the bottom line. I use leading indicators of the price to make it simple.
My fav is the institution's traders whom I call "smart money". they peel off one after another and form a herd. So I just front run the herd with a panel that involves forming bars using a difference of two numbers and I form the bars using a timer. What I read is volatility, drift, and sentiment.
Sentiment gives me the right side of the segment. It's beginning and ending is told to me by volatility. I use drift to keep aligned during the day.
It turns out that retail uses institutional information to make segment profits and institutions can't use retail to make money; instead they use regression, reversion to the mean, issuances and redemptions and all the "big" numbers on Crays.
For common margin 40 trades have to add up to 10 points to double my capital daily. I would say for others it would be 40 points to double.
At 1 point a day it takes two months to double.
Institutions do not double every two months. Some take years of profits to double. If their capital doubles sooner it is because of issuances being greater than redemptions and things like that. this facet is a sales and report publishing facet. Sales is like story telling.
for the retail person, he just times the segments and stays on the side of the market institutional sentiment dictates about 40 times a day.
I especially like "settlement" time for institutions. It is when they decide to go into the market to resolve the difference between issuances and redemptions. It begin after lunch and we all see the pm volume pick up a little here and there. It is a fun time for making a lot of points in a segment. It is provided to us retail guys every day like clock work.
Here2 learn is hearing 2 learn. So is trading..listen and have fun every day.
Lets hear a little criticism on this. It seems too easy.
