Pabst : questions regarding Pit trading

T

trader89

If I am correct, Pabst, you have worked a couple of years as a local in the bond pit ?

I have a couple of questions regarding the bond pit.

I welcolme other members who have experience about pit trading to give their insight too.

- What size were most of the locals trading ? 10, 50, 100 or 1000 ?

- What size were so-called big local trading ?

- Were the so-called big local just a few people i.e less than 10 or more like 20 or 50 among the 500 traders ?

If I'm correct you've worked in the bond pit at the time Tom Baldwin was there ?

In the interview he gave in Market Wizards, he stated that most of his big trades are 4 ticks winners.

- Do big locals really make money by scalping 4 ticks ?

- Could you see how he traded by being in the pit or was it too crowded to be able to follow his trades ?

I find it hard to believe you can make millions in the long run by scalping 4 ticks.

- What is your opinion on making millions by scalping 4 ticks ?

Thanks.
 
I'm not pabst but maybe i could help a bit.





QUOTE]Quote from trader89:


If I am correct, Pabst, you have worked a couple of years as a local in the bond pit ?

I have a couple of questions regarding the bond pit.

I welcolme other members who have experience about pit trading to give their insight too.

- What size were most of the locals trading ? 10, 50, 100 or 1000 ?

IN MY EXPIRINCE THE AVE. IS A 50-100 LOT TRADER. THE BETTER ONES TRADE BIGGER POSITIONS WHEN THEY HAVE EDGE. A GUY I TRADE WITH HAS A GOAL OF 8 GOOD 400 LOT TRADES PER DAY. ANOTHER GUY, I'VE SEEN TAKE OUT 1500 OR MORE WITH MY OWN EYES, AND SAYS HE'LL TRADE ANYTHING.


- What size were so-called big local trading ?

- Were the so-called big local just a few people i.e less than 10 or more like 20 or 50 among the 500 traders ?

If I'm correct you've worked in the bond pit at the time Tom Baldwin was there ?

In the interview he gave in Market Wizards, he stated that most of his big trades are 4 ticks winners.

- Do big locals really make money by scalping 4 ticks ?

THE BEST MONEY THERE IS IN THIS GAME, IMO. YOUR A 100 LOT GUY, GET THERE IN THE MORNING, HAVE 5 1 TICK WINNERS.....YOUR UP 500 TICKS $1250 CASH, GO HOME FLAT AND TAKE YOUR KIDS TO SOCCER PRACTICE.

- Could you see how he traded by being in the pit or was it too crowded to be able to follow his trades ?

I find it hard to believe you can make millions in the long run by scalping 4 ticks.

YA SCALP A COUPLE WINNERS EACH DAY W/ LARGE SIZE, ITS A RECIPE FOR MILLIONS. THE EDGE IS SCRATCHING WHEN YOUR WRONG, AND ACCOMODATIVE FEES, WELL THATS PART OF THE EDGE.
\
- What is your opinion on making millions by scalping 4 ticks ?

Thanks. [/QUOTE]
 
my opinion, after seeing it in action? if you are one of the few that can do it, DO IT. Its a big game to these guys and every point they score (tick) makes them richer. Guys like this do exist now, I trade with many of them, and I'm doing my best to learn their craft.
 
John47,

Thank you for your answer.

I have some experience in forex and what I've seen is about 80% of the time when a trader open a position, the position goes against him first.

This is why I find it hard to believe that a strategy where you risk 10 ticks to win 1 ticks is possible.

But if you and other people have seen it can be done, I'm happy to hear it's possible.

I wish I could go to the bond pit to see it can be done. :)

Regarding the guy trading 400 lot :

1 tick per day : 400*31.25 = $12,500

per week : 12,500*5 = $62,500

per month : 62,500*4 = $250,000

per year : 250,000*12 = $3mio

What kind of month does he average ?

Thanks.
 
Quote from trader89:

If I am correct, Pabst, you have worked a couple of years as a local in the bond pit ?

I was in the Bond pit from the early 80's through the early 90's in the Eurodollars in the mid 90's and in the 10 year in the late 90's.
I have a couple of questions regarding the bond pit.

I welcolme other members who have experience about pit trading to give their insight too.

- What size were most of the locals trading ? 10, 50, 100 or 1000 ?

- What size were so-called big local trading ?

- Were the so-called big local just a few people i.e less than 10 or more like 20 or 50 among the 500 traders ?

The size locals traded was principally a function of physical location in the pit. Floor brokers (order fillers) don't need to look far when making a trade, thus proximity to customer paper was paramount to trading size. Guys who were four steps down saw very little "edge." However as the day progressed and locals "up top" made their money and went home, guys in the middle would get an opportunity to move up and trade "garbage time."

Locals on the top step would take at least 100 at a crack. I'd say their were 30 of those sized guys (myself included) in the Bonds. Most of us would take 200. A dozen or so would take 500 to a 1000 and perhaps "sit" on 2000. Most guys on the second step (50 or so) would take at least 10 and there were several 100-200 lot traders on that step. Any step lower was tough to trade bigger than 5's. Spreaders and second option guys were way down in the middle and many spreaders would trade 1000-5000.

If I'm correct you've worked in the bond pit at the time Tom Baldwin was there ?

In the interview he gave in Market Wizards, he stated that most of his big trades are 4 ticks winners.

- Do big locals really make money by scalping 4 ticks ?

- Could you see how he traded by being in the pit or was it too crowded to be able to follow his trades ?

I find it hard to believe you can make millions in the long run by scalping 4 ticks.

- What is your opinion on making millions by scalping 4 ticks ?

Yes, Tom Baldwin was in the Bond pit while I was there. To put 4 ticks into perspective: each tick or 32nd in the Bonds is $31.25. So four ticks is $125 per contract. On a 100 lot that equals $12,500. That adds up, eh? LOL.

As a rule of thumb I'd say many locals only averaged a dollar or two per contract traded over the course of a year! Take Baldwin for example. Let's say in a given year he'd make 8 million. He'd trade 10,000-20,000 a side each day. That's perhaps three million contracts per year. Member rates on the floor were around a dime after the obligatory 30k a year commission cutoff. So yea 4 ticks is HUGE. Because of commissions and fifo, it's very difficult to even have a positive expectancy on the screen, let alone average 4 ticks per day. Obviously though, if one has a method that allows shallow drawdowns then making just a few ticks per day on average while trading size can make one quite wealthy.

The pit was way too crowded to see what Baldwin was doing. Also much trade was quietly done so it was much like poker. You were always trying to guess which way guy's were loaded up.


Thanks.
More...
 
Pabst,

Thank you for your detailed answer.

I didn't expect that they were so many locals doing size. I thought maybe 10 or so.

I see now how they could run stops. If 30 locals buy 200 at a clip at the high or low of the previous session, they will easily clear stops.

I understand that taking a few ticks while doing size will add up to a couple of millions at the end of the year.

The question is how to avoid the drawdowns when you take a lot of trades ?

Could you as a local close your trade at even most of the time ?
 
Quote from trader89:

Pabst,

Thank you for your detailed answer.

I didn't expect that they were so many locals doing size. I thought maybe 10 or so.

I see now how they could run stops. If 30 locals buy 200 at a clip at the high or low of the previous session, they will easily clear stops.

I understand that taking a few ticks while doing size will add up to a couple of millions at the end of the year.

The question is how to avoid the drawdowns when you take a lot of trades ?

Could you as a local close your trade at even most of the time ?
More...

Let me start out 89 by saying that in financial futures i.e. markets that have absolute levels of arbitrage to underlying cash markets, there's rarely or never a case of locals "running stops." Pure myth. In Pork Bellies circa 1975 or Sugar circa 2006, yes. In Bonds, S&P's or currencies, impossible. If we knew there were sell stops underneath we'd never be able to offer below fair value to the Long Bond (30 year cash) without arbs (Primary Dealers) lifting us. The pit was usually loaded up the wrong way into stops and added more facilitating the stops. That point segues perfectly into your other questions. As a local you could "scratch" your trades often. If I bought 50 at 6 I'd sell them back at 6 if the bid started to actively trade. Sometimes though, and the bigger your size the more often this happened, you'd lose the bid. Now you own 6's and it's 5 bid. You hesitate and someone blows out the 5's. Then the broker who sold you the 6's try's to help you out by selling you some 4's on a new order. So now you're long 50@6 and 50@4 with a 4b 5a market. So you try to sell 5's for the scratch. It looks good. Some 5's are trading but with 500 people willing to sell them you don't get filled. Now you're fuming. You're thinking that one of the brokers who paid someone else 5 is "an asshole" and never trades with you. Now you're screaming "sell a hundred at 5" and Baldwin, realizing that you and your ilk are stuck long sells the fours and sell stops are triggered on the subsequent 3 print. Brokers are now offering 2's and in turn setting off a flurry of new stops. Now you're out 10k in a couple of minutes which is a couple of days work. Should you just get out or try to get even? The broker who loaded you up at 6 and 4 now has stops to sell you at 00. Many times you'll buy 100 of those and now be long a total of 200. The market stabilizes and you sell 2's, 3's, and 4's on the way up and make 50 or 100 ticks on the whole incident. However other times the market falls apart and you lose a month of wages in the ensuing hour.
 
Pabst,

Thank you for your explanation.

It looks like this strategy is not possible on the screen.

Do you know what these big locals (including you) are doing trading on the screen ?

Can they really replicate their edge from the pit to the screen ?
 
its not totally the same on the screen but its the same concepts. Your trying to see what paper is actually doing and be on the right side, you read order flow like pabst said to know when a shit load of your friends are stuck long or short, and take advantage of the push when they're forced to blast out. Thats the game.

Forex you could never do this, at least from what I understand about forex. Too much of it is keyed on reading order flow, be it paper orders or other locals. Like pabst said, and something that is talked about alot on this board, its all about your edge. The edge with guys like, say, Baldwin, that scalp very liquid stuff like treasuries is that they trade when they have a very high probability of being able to scratch when they're wrong, and be out nothing but fees.
 
You must log in or register to reply here.
Back
Top