just starting, need advice.

[Threei]

Originally posted by vladiator
The posts I read yesterday in other threads seem to indicate that one should almost never use market orders. On the other hand, today's posts imply that a limit order doesn't give a lot of benefits it's supposed to give either. ...What's the best way I can buy large quantities before the close and sell at or soon after the open and get the prices that are close to what is quoted???

Here is how it works.

Your limit order is going to get filled if market trades through your price (goes against your order). You can't get price improvement because sending your limit order you in fact said: "I want my order to get filled at this price". There are cases of price improvement but they don't seem to be related to what you are asking about. If market gets away from you your order will remain unfilled or filled partially.

Your market order is going to get filled in any case. Sending it you in fact said: "I want my order to get filled at any price obtainable". If market goes against your order you might get improvement comparing to the price at the moment of order being received by market. If market gets away from you you are going to get worse prices than there were at the moment of order being received by market.

How much worse/better - really depends on particular stock at particular moment. Thick stock with big depth, good volume, trading normally without any hysteria will give you fills very close to the price available at the moment of order being received by marketplace. Stock with thin levels, big gaps between levels, small sizes offered can fill you anywhere, and on big lots this "anywhere" can be real scary.

You can judge what kind of stock you deal with by the volume, chart look, but major tool for this is level 2. With some experience (quite basic) it instantly lets you know what kind of risk market order carries.

I intentionally leave aside discussion of your business idea others have offered you. Doesn't mean I disagree with them

Good luck!

Vad

 

[nitro]

...Aren't large trades that in my case help out the market maker when the conditions are against him and his inventories are out of balance supposed to be providing liquidity and getting even better prices than what is quoted???

vlad,

Yes, you are thinking about MOC and MOO orders. IB has these as well as others.

I believe I have seen a study like yours somewhere, or perhaps a poster here. If you did a dissertation on this, what University and what is the paper? Is it online?

FWIW, I belive in what you have done. _BUT_, _LISTEN_, try it for _ONE_WEEK_ with 100 shares to get a feeling for the nuances of the orders and what to expect.

For crying out loud, if you are a scientist, you'd know this. Remember when the space shuttle blew up and there was a panel of experts/scientist all discussing about how maybe the O-Rings if exposed to the cold may or may not become brittle and it went on and on like this until Feynman just couldn't take it anymore, went and got a goddam bucket of frozen water/ice and stuck the F_____ing thing in it, and lo and behold, they froze and became brittle!!

Don't fly your "space shuttle" and hope all is OK - try sticking your "O-Rings" in cold water first on the ground when little is at stake.

nitro

 

[Neil]

vlad the imploder.. sorry.. I have read so much nonsense here and rarely comment.. but... jeez.. a fool and their money.. I guess there are people who have wealth and would give a percentage of it to you to try your new wonder system.. good luck to you and them.. but it will end in tears..

Or... maybe not.. maybe you have found it.. the way.. the system.. outstanding! If you can just figure out whether to use limit or market orders you are on to a winner for sure..

May the road rise before you and the wind be always at your back

 

[vladiator]

Like I said before, there is nothing foolish in it and had you seen the study, you'd have agreed. Hence, regardless of how successful you are/have been trading so far, I don't see the point of the cynicism.

 

[Magna]

Originally posted by Threei
Here is how it works. Your limit order is going to get filled if market trades through your price (goes against your order). You can't get price improvement because sending your limit order you in fact said: "I want my order to get filled at this price". There are cases of price improvement but they don't seem to be related to what you are asking about. If market gets away from you your order will remain unfilled or filled partially.

Actually your limit order says, "I want my order filled at this price or better" so that if the market is 30.04 x 30.08 and you place a buy-limit order at 30.10, depending on liquidity you will be filled at 30.08 - 30.10 (but no higher).

Originally posted by Neil
If you can just figure out whether to use limit or market orders you are on to a winner for sure..

LOL.

 

[Threei]

Originally posted by Magna
Actually your limit order says, "I want my order filled at this price or better" so that if the market is 30.04 x 30.08 and you place a buy-limit order at 30.10, depending on liquidity you will be filled at 30.08 - 30.10 (but no higher

True. I assumed automatically (and possibly erroneously) that vlad meant limit order not crossing the current price. I stand corrected.

Vad

edit: actually, that's what I meant when said that there are cases of price improvement on limit order: this case you mentioned, case with hidden order, case with almost simultaneously entered order on opposite side which hit the market just before yours did so you got a cross...

 

[buzzy2]

Originally posted by vladiator
Hi guys. A little background first. I'm finance PhD student and have developed a rather profitable trading rule using intraday data.
Thanks a bunch in advance.

vladiator, my 0.02:

i) Be patient, arbitrage opportunities will always be there (hey you are a finance phd so you have read grossman and stiglitz, havent ya?), so there is plenty of time to plan carefully your strategy before you actually put money and your reputation on the line, yeah i know it's cliche, but it's true that "every battle is won before it's ever fought".

ii) I would prefer to test any new strategy with my own money. If you go straight to risk OPM, you don't risk anything financially but you risk something as valuable as money: your reputation. If you blow up at the first try with OPM, it's more difficult you will get a second chance. With your own money you can keep trying until you get it. Hedge fund managers make a living from their track records and reputations (and trading skills of course) so be very careful with these.

iii) There are more inefficiencies in equities than in futures, so it's "easier" to make money in equities, but on the other hand the infrastructure costs are bigger, you have to spend more in equipment, networking and hire more people to take care of executions, that systems are working etc etc so I see why you need big volume to cover fixed costs.

iv) My advice is that, if you have no experience whatsoever in trading, get some, there are no shortcuts for that. Go to work to a hedge fund, I know people who are hiring. If you are interested PM me and I will give you specific contacts. You will get experience, but if your strategies turn out to be very profitable, you will get only a small slice of the cake. You can always leave later once you have more experience and money, but check your contract for nondisclosure agreements, etc. etc. The less experience you have the less bargaining power you have and the harder they stick it to ya.

v) If you apply, maybe you can get an offer to work at an IBank but these days it's very difficult to get a "trading" job for finance/economics phd's, most are consulting/sales/b.s. - type jobs, so I don't think that's a good option if you want to get into stat arb, unless you contact the right people. The stat arb groups that I know prefer computer science/physics/statistics/electrical eng phds, that's because, unfortunately, recent finance and economics phds are lacking in quantitative and programming skills and have learnt lots of theories that are not really useful in the real world. It's going to be very difficult for you to overcome that perception.

vi) You may also try markets with less fixed costs and easy executions for example futures, you will be able to get a track record with less money, but inefficiencies are harder to detect than in equities, so you will probably have to be spend more time refining your trading "framework".

 

[dojibear]

quote:
" Put up $10K of your own money, trade 100-500 share lots, real time-real money, and then see how well you do. "

Heck! if Vlad is fortunate enough to be able to learn to trade and test his program with the clients' money, than good for him.

Except that the clients will have to signed all appropriate papers in triplicata, with withnesses, so if things went bad, it will only affect the reputation or future references, and none of the "lawyers' fees".

However, Vlad (I think you mentionned Ameritrade?), you will also have to look into the difference between having a direct access account and other so called "online account", which some are not direct access, but going thru' the broker.
e.g. you place a limit price to buy, and the stock goes down. Your broker may sell to you at your limit price (from his inventory or he shorts it), and turn around and buy back the shares from the market at lower price.



Cheers!

 

[wwatson1]

Your system sounds like the one I have been waiting for, give it to me.

 

[myoffices]

When I see people say that they traded a strategy on paper and then think they can trade similar in real life I have to urge caution. The killer of all traders is emotion and confidence. One bad trade and woops there goes the confidence. another good trade missed because of confidence lack and there goes the emotion and so forth and so on. Before long the strategy is out the window.

Trading is an art and a discipline. I feel like an episode of Kung Fu.

What the heck stick to your plan and if you can try to use trailing stops to pull the triggers and use the proper alerts when to buy and remember to go the the bathroom before the market opens so if your trade makes you nervous you can hold it.

Post your track record when you start somewhere.