Since the expected profit from trading should be the bid/ask spread minus commissions and fees, will rebate trading be the future of day trading? Since most stocks are now traded in one cent spreads won't capturing the small spread along with rebates be the most consistent path to profitability?
Is rebate trading with near zero commissions the future of active trading?
- Thread starter tm689
- Start date
Robert Morse
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You will not make $0.01 on every trade. Some you will have to break even and have to pay for taking on some. Some you will lose a few cents. Back when Citibank traded enormous volume and moved less than $0.05 in an average day, this worked. Not today.
As the head of a major investment bank recently noted "we are not in the guess what happens next business, we are in the transactional business". On average your profit should be the 1 cent spread. When the market moves in your favor you make 2 or so, when it moves against you might break even or lose 1 cent. On average if you always buy at the bid and sell at the offer your expected profit should be the spread minus commissions and fees.
I recommend you read this book to answer your question: https://en.wikipedia.org/wiki/Flash_Boys
Most of the traders who didn't know what their economic function in the market was are no longer traders. Traders provide liquidity. That means making the spread. People who think they can guess market moves hundreds of times a day are probably setting themselves up for disappointment.
NOT! If you're going to make any real money, you need to make significant, unhedged bets on direction and be correct about it.
"Playing for rebates", "trying to narrow the spread", "seeking slightly lower commissions"... are all "niggling" incidentals. If that's your play, you might as well park your dough in T-Bills and go fishing.
IOW... You can't "pussyfoot your way to financial success"... if rebates and trying to capture a piece of the spread are your objectives, you're doing it wrong. Those things are incidentals. If you get them to your benefit, that's great... but they won't do much for your P/L bottom line.
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When I saw the title of this, I thought someone dug up an old thread from 2001.
Good luck rebate trading against Virtu, Getco, Etc.
LOL
Good luck rebate trading against Virtu, Getco, Etc.
LOL
Rebate trading is the past, not the future.
There actually was a time when, if you were working with a firm that already offered low commissions, rebate trading was very lucrative. Now, the structures have changed, the rebates are minimal, the spread is tight, so not so much.
Market-making is a computer game now, and they will eat you up. You will never consistently make the spread.
There actually was a time when, if you were working with a firm that already offered low commissions, rebate trading was very lucrative. Now, the structures have changed, the rebates are minimal, the spread is tight, so not so much.
Market-making is a computer game now, and they will eat you up. You will never consistently make the spread.
you can barely get filled on the bid when buying / ask when selling unless the f***ing price is blowing through
co location and market structure favors the insiders.
my NAME says it all
co location and market structure favors the insiders.
my NAME says it all