It's been 3 years and I'm back!

[TraDaToR]

Sommi, it seems you are a kind of "short gamma" trader like option sellers or MMs/Liquidity providers( You make money most of the time but hit a monstrous loss once in a while ). I am too, and I wonder : Do you see yourself doing the same thing in 10 years when you will have kids to take care of, responsibilities...?That's a question I have trouble answering for myself( even though I never lost more than 1-2 month of gains in a "black swan")

 

[s0mmi]

good to see you back posting. its been a rough few years for prop traders, only the best have survived and their accounts continue to grow. I totally agree with what you have written about having friends in the industry who wont listen. This is mainly a function of having to be sure of yourself as a pro trader. Even in a prop environment if you hear someone talking guff or doing really dumb things you tend not to say anything as they wont listen anyway and you dont want to come across as a cunt. It's a fine balance. Every now and again then you see someone who is so obviously on the wrong track that you cannot help but try and reach out, like you intimate most of these people have the blinkers on, that's the nature of the game.

You got a nice set of monthly outgoings there, CGQ plus TT, thats the only way if you want to do it properly.

That big drawdown you took was ballsy, I have seen people pull those stunts, some of them are still around but others are gone. The question is and I am sure you know this. 'what are you going to do next time it happens?', are you going to cut earlier and rebuild or are you going to leave it all hanging out there. that's when it can get scary.

GL

I have many stories about friends who I've tried to help (and even told them to copy my trades 1 for 1 every day until they get the hang of it after a month) but it's not enough. Some people just want to figure it out by themselves. This game doesn't reward ego or pride or doing it yourself unfortunately.

That drawdown I took was big, but believe me there were about 4 times after that where I was 'tested' and I took the loss every time. I was very proud of that and I'm actually taking smaller losses today. I don't worry about myself but I worry about others who haven't been tested yet but are taking double the risk they should (because in a mass skew event they can lose 6 months instead of say 3 months worth).

I'm forever haunted and scarred by that day so it's impossible for me to have a gambling tendency to just let it all go forever now.

Sommi, it seems you are a kind of "short gamma" trader like option sellers or MMs/Liquidity providers( You make money most of the time but hit a monstrous loss once in a while ). I am too, and I wonder : Do you see yourself doing the same thing in 10 years when you will have kids to take care of, responsibilities...?That's a question I have trouble answering for myself( even though I never lost more than 1-2 month of gains in a "black swan")

Hey friend, I used to have that style for the first 4 years of my trading but I have significantly changed that this year. My losses are now a little more frequent (~2-3 days a month instead of mostly 0 or 1), with less Win percentage days in the month, but my downside is obviously way more protected because I have specific time stops which are even shorter duration than they used to be (in other words I have an earlier "I give up" button because markets arent as healthy moving as it used to be). So the reason why my loss frequency went higher is because of adapting to these conditions. Maybe you can do the same thing to protect yourself?

Ask yourself, how often when you go 30% of your black swan stop, does it actually come back and how far? For me, it was 1/5 times it comes back. So I actually changed to the point to not get too aggressive like I used to, and now I can accept -$30k losses and move on. Much better than staring at -$100k imho

We've had to change with the times because there is much less 2-way action in spreads across all markets, so risking heaps in on any one trade makes no sense.. you just can't make it back. By the way, I didn't change to this style on purpose.. its because the spreads we are involved in have less binary payoffs, and forced me... I was trading them wrong in the early period and would do very very bad and harmful pnl damage until my friend helped me out with the conditions. So its not like I was doing it right, I was wrong many times first.

Having the best risk/reward metrics necessarily because you may never get exposed... but in these conditions, with lower volatility and lower 2-way action the bad trades get exposed time and time and time again.

In 10 years we hope that trading is still going well but these risk principals will never die!

Losing 1-2 months of gains in a Black Swan is where you want to keep it at. Be very proud of that. Ive heard of one of the big traders going ~8 months down, and multiple times over the past few years, and having to scalp and trade it back! Its not worth being that guy... so we always build a buffer and keep sizing up to cover expenses for the year and a nice safety net.


I'll give a little explanation of what we did to evolve our risk metric trading if anyone is curious:

Risk Metrics

For current market conditions across all interest-rate related products, volatility is heavily subdued even in the long-end. It is statistically bad/red to be leaving larger drawdowns on the table to accept the now (lower) average profit per day. If youre only ending up half a black swan stop on average then you need to be even more careful with your downside approach.

I do not trust market conditions to be positive EV if you set conditions on price movement with a dollar stop. Every trade I've seen like this is RED Ev (aka. do not trade with a "Im making point A money or losing at Stop B point".

You must use all dimensions in these conditions I feel:

1. Do not trade with a dollar stop -- instead make it a function of Time and Volume (when most of the days volume is done and its a certain time region, its time to exit because the session is pretty much done for your trade)

2. Mark out all volume indicators and jump in on them -- noise trading is dogshit compared to news/top tier data trading so you are way better off participating (with either scalps or momentum level plays) in higher volume periods. This is usually just 15-20mins around data figures or the most active period of your product (for example I have the 4hr session pre/open area for the U.S. Curve products marked)

3. If you have a problem exiting at one point, put a 2-hour time window and get half out at the beginning, and then half out at the end. This helps a lot of people trying to get that golden spread price who just hate paying across a slippage intensive market when we are hunting for ticks badly

Finally i'll add, every time you don't think "I am exiting this trade at time [whatever] if it hasnt come back.. its a ticking time bomb. I can only say this because its happened too many times and I've learned the lesson! I hope someone can instinctively fix theirs now before its too late. Literally.. I had to learn this lesson 7-8 times before someone had to tell me Im a f*cking idiot and need to exit.

We all want a magic potion to drink to fix our trading but the truth is that its the tiniest, little actions (after some heavy philosophical/statistical work in the head) that actually make the big impacts over a month or quarter.

 

[propwarrior]

This game doesn't reward ego or pride or doing it yourself unfortunately.

totally agree. Managing ego is really hard. After a long string of winners, cutting a trade for a small loss and not re-entering is tough. You have to know yourself really well and have the presence of mind to manage yourself real time.

 

[Zestilio]

Perhaps you should ask yourself why any successful business person would EVER sacrifice their time and resources to help others. They do it every day, so there must be a reason.

It's because some things in life are worth more than money. And I can assure you that helping others along their journeys by sharing your own successes and failures is one of those things. And you want to know why that is? It's because helping others gives you something back that money in itself cannot. And that's joy. It's a powerful feeling and anybody who's truly experienced it wants more of it.

And any super-successful person isn't naive enough to believe that he achieved his success all on his own. He knows deep inside that he had some help from other people along the way in a variety of ways. So it's only natural to express thanks by turning the table and helping others who haven't achieved a similar level of success yet.

Well, if that's really the case, then I can only envy your altruism and open-minded nature. I'm still really far from getting to this level of self-consciousness.

 

[ironchef]

There are many reasons why I, for one, do it... Some of these reasons are a bit more altruistic than others (along the lines of what Baron mentioned). Regardless, stop your wondering and accept that there are reasons.

To the OP, well done for surviving... Hope you keep your mojo and best of luck!

I am one of those that benefited from your posts and helps. Thank you sir.

I don't day trade anymore, too hard for me. I am now full time trading options (for the last 3 1/2 years) as I find that a lot less risky.

 

[BungaBunga]

Thanks for your insights s0mmi, great stuff.

Would like to ask you what your thoughts are on order flow trading and the related software coming out these days and if it helps your type of trading? It seems to be getting popular as a way of trading for the retail trader to help against algos etc?

 

[Surprise]

Without a verified track record then its all hearsay ...

 

[s0mmi]

Without a verified track record then its all hearsay ...

You should always be skeptical. Always. I can tell if someone is scamming or genuine because Im in the game every day, but its unfortunate when people get conned.

I have a record of my entire trading career from starting. I haev struggled this entire year (can see by the giant 100k swings up the top), but am working on some brand new strategies and my confidence has been restored. Hoping for another mountain climb in the upcoming months, years and decade. Im always open to helping people if theyre willing to commit to the game. Im taking on a friend at the end of the year and if I can get him on the path to my level then I may consider others.

My pNl is nothing special especially considering its full time and that I have to start from scratch again. I am a peanut compared to many guys I know.

 

[Handle123]

If I had a short attention span like you then I wouldn't be here. I guess you were unaware yesterday was the biggest data figure of the month and requires every trader to their ritualistic research and planning before/after?



I'll give some specific trade ideas here in this post because you're a kind sir.

Looking at U.S. spreads, you need to be a multi-market trader multi-purpose trader to compete because all the old order flow ways of trading are mostly gone. Correlations with currencies and equities vs. Bonds are all DEAD because of QE. You need to evolve. Anyway I've done the homework for you so here it is.

A great way to start making money is to have access to the following products:

[U.S.A]
1. FYT (5yr-10yr)
2. NOB (10yr-30yr)
3. BOB (30yr v Ultra Long End)

https://imgur.com/a/xZG1A

You can't just have 1 chart up anymore, you need a few (because every day, you might not be getting the best selection). That's what I have up. As you can see I also have the TUF (2yr-5yr) but that is completely useless now because of the dead interest rate cycle, and the brokerage is INSANE especially for international traders like me. The GTEX, in case anyone is wondering, is the difference between the T-Note (10yr) and the T-Bond (10yr). The T-note is actually 7yr cash delivery, the T-Bond is 10yr. The T-Bond does way less volume than the T-Note and no-one really hits it first on anything, so I guess its more a momentum or mean-reverting trade.

Anyway moving on, let's look at one product the FYT. 5yr note v 10yr note. You can't just have the interlink up and trade off that because it resets to 0 every day. You don't know if todays price is cheap or expensive for bigger players. Just use cqg and manually create the chart, (3 times 5yr note) minus (2 times 10yr note)

https://imgur.com/a/ud6pp

A few things on this chart which are important:

1. If you're day trading you should probably have a 5 or 15 min chart scrunched up. In these dog shit conditions, since you are not trading fundamental trends in the noise anymore, you need to trade based off standard deviation (bare bones trading). All I have up there is two bollingers, the green line is 2nd standard deviation and red is the 3rd st dev. Both of these are 24-hour bollingers (so value 144 I think for 5-min). I never used to have a single technical up many years ago because you didn't need to, but unfortunately now these products are all fucked thanks to triple QE and interest rate fuckery.

2. The blue parts of the line, visually, let you see the U.S. session. You can't see all of it, but there's a pattern for the past 3-5 months... the U.S. session (shown in blue) usually either reverts the spread back or creates safe ranges to play. This is great information to have so you can trade. You can trade either off a noise scalp, or a noise reversion if you like. You can sort yourself out with a full clip or half clip trade on either. You still need to watch the interlink chart because you want a good price and to see how its trading is most important. Having wolf-like focus is always going to keep you ahead of the game.

So there you have a few products at your disposal, bollinger bands to gauge distance, and U.S. session information to tell you that your primary trading times should be 1-1.5 hrs before E-mini cash open, and rest of U.S. session.

3. You can make money off this info except you must respect Tier 1 data and news. Use the fact that algorithms are 99% of the market now to your advantage. They're all cockroach scum cunts so its easy to hit stuff with them. Tier 1 data like U.S. CPI, GDP, FOMC minutes, FOMC meeting, etc (note: everything RED on Forex Factory) is very important.

In these conditions most money I'll make on these is off data figures or around noise if you scalp and don't get to aggressive.

If you get into these you need to
1. Never hold a position into Tier 1 data (because it can move them 5-10 ticks and blow your risk/reward scheme)
2. When the Tier 1 data comes out, never fade it (unless its in-line and theres a decent spike after it). All the 2yr and 5yr short end volume will be pumping one way with the data most of the time, do not fight it. Either go with it and scalp out, or wait for a range to settle, and go with the pullback.
3. Risk/reward. You don't want to getting in and averaging heaps because when you lose it will be on 3 clips times 4 ticks = 12 ticks but when you win you will only get a pathetic 1-2 ticks in these conditions

Profit/Loss Risk/Reward

Going off me and everyone I know who is winning right now, there's two times they're making money. The first time is 'Noise' although its pretty shit. The next is 'Data'.

'Noise' requirements
1. Timing (I just solved it for you, 1 hour before E-mini Opens is when to start sniffing)
2. Set your profit/loss scheme plan out. I advise staying away from taking a fixed profit amount every time. In stead, get in and see how far its gone, and aim for that exit. But every day can change. Some days you'll get 1 tick, some days 4 ticks.
3. Have a time-stop and Black-swan dollar stop. 1-2 hours before the U.S. session ends, and whatever your stop is. If you could make $1k-2k in these products its probably wise to set that Black-swan figure at $10k. Hopefully it doesnt hit it this, and if you do take hits its -$3k to -$6k

Finally, many million dollar traders couldn't take these ranges and the pain hence are all out of a job. This is what the market gives you. Instead of 6 tick profits from 10yrs ago maybe now you have to take 1-2 sometimes. Also the reversion is something you have to figure out because it depends on many factors like if the Bund is being a cunt, how the interlink is trading and ranging etc. Its not that hard to figure out, the important part is everything I just mentioned above with the charts and informational advantage. Participating in high-probability trades is the only way to move forward in these tough times.

'Data' requirements
1. Timing (Check Forex Factory for red flag releases) of Tier 1
2. Do not have a position going into the data or event. Must be flat or else you really love gambling.
3. Plan before hand, if it's great number etc. you go trying to sell the FYT or the NOB at certain prices, if it's a bad number you buy them, and if it's in line then you are happy to fade somewhere. Once again you need a time-stop. Is it 15mins or 60mins you want? The dollar figure should be the same.


====

There's a lot to soak in but I just gave a blueprint of how you can still scalp away in these markets. Obviously my returns on risk this year are the lowest they've ever been, and from the ~8 people I've gathered information from, they are also risking twice as much to make the same amount as last year or the previous years. Note this is all in bonds though.

One of the Best informative posts I have seen in awhile as this subject seldom talked about on Interest rates. If it not day trading Indexes or swinging stocks, most won't see this as a gem cause people want to "see" signals instead of creating their own.

Excellent post, thank you.

Do you carry positions over night? The only spread I day trade in ES/NQ, the Financials are mostly in/out in a month. I use to love doing the mob spread, too bad exchanges get rid of Muni futures.

 

[s0mmi]

One of the Best informative posts I have seen in awhile as this subject seldom talked about on Interest rates. If it not day trading Indexes or swinging stocks, most won't see this as a gem cause people want to "see" signals instead of creating their own.

Excellent post, thank you.

Do you carry positions over night? The only spread I day trade in ES/NQ, the Financials are mostly in/out in a month. I use to love doing the mob spread, too bad exchanges get rid of Muni futures.

Hey friend. I Used to do some over night positions (I have tried many many things like EUrodollar spreads, Oil spreads, Oil butterflies, and other Bond stuff) but I have since stopped them. THe risk/reward does not compare to Day Trading using some better strategies.

If you are day trading the ES/NQ, I really recommend doing the following:

1. Bring up 3 ladders:

--> Nasdaq, Eminis, Dow Jones

All of them should be fat and thick. Hopefully you use a proper scalping program like X_Trader or Jigsaw (ninja trader addon), CQG is also possible for it. You line up the ladders and trade it from the U.S. 8am to midday

I also advise:

Eurostoxx with Dax ladders. Scrunch the dax up. Use market profile and volume leads, its very very transparent. Trading outright is 10 times easier than spreads.

Janet Yellen is a wh0re and a f*cking sl*t, there is no hope for spreaders next year or the year after. She catered to Wall street and is continuing this credit bubble at dangerous interest rates. Instead of fighting it, we have to just go with whats easy.

Btw when you trade those products, just trade the Emini and just trade the Eurostoxx. Theyre the thickest. ANy other Q's let me know