Quote from ukxgerard:
Futures Trader,
Excellent thread. Thanks for the great exposition on reading the DOM and scalping tactics in general. May I ask some other questions, that hopefully will not go off topic too much?
1. Have you looked at other EUREX products - Stoxx, Bund, Bobl? How did you fare?
I traded STOXX 50 for a while until the liquidity went way up and the volatility way down. It just got too thick for me to scalp efficiently. There were days where it only had a 14 tick range for the entire 11 hour session. I made my first net $1,000 in the STOXX. I also traded the bund for a while as a secondary market, but I just don't like products that are too liquid. The bund, however, had some good moves when it went.
2. You mention in previous posts, that you average into positions. Does this imply you will average a loser?
Never, if I can help it. That is by far the worst move a scalper can make. The mind does not work the same way when a position is already on while scalping. One has to accept that the perspective changes and our perception of the market is not the same when a position is on. Hence, I will get out for a 2-tick max whenever I can before initiating another position even if I am "certain" that I'm right. If I'm wrong, then I've caught what could have been a bad loser. If I'm right, then I will make those 2 ticks up when the move happens.
I don't really average into a position. I scale in. Depending on the move, I will take several price levels to get size on that I'm comfortable with. I help generate momentum by doing that. Unfortunately, I sometime end up buying too much too high in a choppy market, but it is a risk worth taking for me. It happens that a move looks like a massive rally or sell off and then it only goes 3 ticks before turning. I take a good loser and use that as an indicator that I need to cut size or take what I can at the first price.
3. I understand you use TT as your primary interface. Have you ever used ECCO or RTS? I have just started to use ECCO and like it a lot. I don't think many people on the forum have even heard of it.
I tried ECCOware. I didn't like it because it was unfamiliar and cost almost the same. I also didn't like that my local machine acts as the gateway server. For me, this presents unnecessary risk. With TT, the gateway server is independent. This means that my same account is accessible through any other computer with TT on it. Hence, if my computer implodes (
), I can log onto TT from my CQG machine or another computer and still be able to see and cancel my orders and continue trading. Also, I can quickly call the risk manager who can just hit one button to trade me out and cancel my orders. With Ecco, it sends the orders directly from my trading machine and any emergency procedures will have to involve the exchanges as if it is a system-wide failure. Besides, Ecco is missing some key features that I like in X-Trader. They are working on incorporating many of my suggestions, but not fast enough.
4. In other posts you have emphasized the need for direct connectivity, if you do indeed move away from Chicago would that not compromise a low latency? I assume your clearer is connected directly to the EUREX hub?
Yes. My clearer is an FCM with a direct connection via a channelized T-1 to the Chicago access point to Eurex. I will be running a dedicated private line over fiber using WilTel once I move to the DC area. My current latency from my trading machine through the local network to the Eurex access point in Chicago is 16 ms. From my new location, the total latency will be 30 ms. That is very acceptable.
Besides, my reason for coming to ET is to learn what others are doing and find something that will help me move away from needing such latencies, etc. I think I will be a scalper for a long time to come, but I would prefer not to have to depend on latency to maximize my profits. Time shall reveal all.
4. I am making the transition from the floor to the screen. The above advice is really solid and apart from hard work (lots!) are there any other nuggets that you can pass on.
I have traded with others who have transitioned from the floor. I can honestly tell you that they were the worst traders I have seen when they first make the move. Very few survive it. They often come with some seriously bad habits and issues relating to the ego. They believe that because they have made money on the floor, that they are different and don't really need to start with 1-lots. I know a guy who lost $550,000 before throwing up his hands. He would average losers down and go to market to initiate a move not realizing that he is missing 75% of the signals he used to get from the other traders.
My suggestion is to start from scratch and you will only have to think "small" for a couple of months. There is a different flow on the computer screen. Come up with an extremely good risk plan that you
believe in. Not one that you copied and don't really care for. Ingrain in your mind that the market is a reflection of your attitude, your ego, your discipline and the quality of your plan. I have had days where my entire group would be losing money and one guy, who is normally not exceptional, would be having his best days in the same products. It goes to show that it is in the mind and what we expect from the markets. The market is the master and you just have to accept what it gives you rather than tell it what you want and try to force it out. It will ultimately show you who is the boss.
Watch the DOM and tape for a while before starting live to get a read on your product's pulse. You will have to establish the flow of your product and try to merge in with it like you do driving onto a highway from a local road.
What products did you trade on the floor and what product will you transition to?
Best wishes and good luck.
