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'Prop" then drop
- Thread starter handle_this
- Start date
Quote from Midas:
Opening orders and pair trading (what a lot of Bright traders are into) can have an edge. It is up to the individual to make it work.
Deal flow is an edge being on a desk with high volume.
Having a huge amount of money to trade with can become an edge if you can handle it, just as too little can be detrimental and not realistic.
Information is an edge obviously.
How is the difference between two companies equities an edge ? Lets stay statistically they correlate and then they come undone, you sell thinking statistically they will revert to mean, yet they blow out further. You find out later the insiders were buying and the leading company has "news" only a few knew about- how does a trader have the edge ?
Kepping a simple pairs trade example........ hypothetical, but could happen
Quote from handle_this:
Deal flow is an edge being on a desk with high volume.
Having a huge amount of money to trade with can become an edge if you can handle it, just as too little can be detrimental and not realistic.
Information is an edge obviously.
How is the difference between two companies equities an edge ? Lets stay statistically they correlate and then they come undone, you sell thinking statistically they will revert to mean, yet they blow out further. You find out later the insiders were buying and the leading company has "news" only a few knew about- how does a trader have the edge ?
Kepping a simple pairs trade example........ hypothetical, but could happen
Statistical edge.
The often used coin flip analogy:
If you flip a coin 1000 times you are likely have 50% heads and 50% tails. If You pay me $2 every time I flip heads, and I pay you $1 every time I flip tails, I will make money over time.
Variations of this are often used in Stat arb.
When you trade pairs you are dealing in probabilities, not is certianties.
Quote from Midas:
Statistical edge.
The often used coin flip analogy:
If you flip a coin 1000 times you are likely have 50% heads and 50% tails. If You pay me $2 every time I flip heads, and I pay you $1 every time I flip tails, I will make money over time.
Variations of this are often used in Stat arb.
When you trade pairs you are dealing in probabilities, nothing is certianties.
Fair enough I agree- little guy sitting in with Bright guys with Excel has very little statistical evidence that a spread should or should not do something in my opinion.
The coin flip analogy I get- in reality the stats these guys at bright and others bet on are thin at best IMO
Quote from handle_this:
Fair enough I agree- little guy sitting in with Bright guys with Excel has very little statistical evidence that a spread should or should not do something in my opinion.
The coin flip analogy I get- in reality the stats these guys at bright and others bet on are thin at best IMO
Not so, you can find an edge just pulling up ratio charts on highly correlated securities in e-signal. Many pairs have tight ranges over long periods of time that can be easily seen on these ratio charts. You don't need complecated programs a team of quants, etc......... sometimes its best to keep things simple.
Quote from Midas:
Not so, you can find an edge just pulling up ratio charts on highly correlated securities in e-signal. Many pairs have tight ranges over long periods of time that can be easily seen on these ratio charts. You don't need complecated programs a team of quants, etc......... sometimes its best to keep things simple.
What is a strategy other then pair stat trading you have seen work rather well, in other words has longevity ?
Thanks
Quote from handle_this:
What is a strategy other then pair stat trading you have seen work rather well, in other words has longevity ?
Thanks
You have it all wrong. The market is ever changing. You must change and adapt with it. You work an edge until it does not work any more and then you move on. A career trading is a career that is ever changing. When I got started we were shifting from fraction pricing to decimals... Traders had to adapt.
When the ecn's just started out you could watch a stock like emc and arb island and nyse all day... that went away. Price improvement strategies worked really well for years.... That went away a few years ago. Opening orders and MOC strategies have worked for years... for some they still do while others can't make since of them.
When one door closes another opens.
Now we can now short on a down tick.
Now we can automate.
Now we have powerfull software that allows us to watch arb opportunities in 100s of pairs.
Now we can back test.
Now the specialist is gone and black and white algos are the liquidity providers providing opportunities.
Now commissions are .005 or less.
To quote the Budha. The only constant is change. In trading change happens in hyper drive. Adapt............ or fall by the wayside.
Agree- thanks
Mostly, people are not going to discuss whats working, why would they, others will do it. My point exactly.
If your in a prop firm with 500 traders clearing through them, the prop partners "know " whats working and little old 50k account guy does not, he just keeps trying
Mostly, people are not going to discuss whats working, why would they, others will do it. My point exactly.
If your in a prop firm with 500 traders clearing through them, the prop partners "know " whats working and little old 50k account guy does not, he just keeps trying
Quote from Midas:
You have it all wrong. The market is ever changing. You must change and adapt with it. You work an edge until it does not work any more and then you move on. A career trading is a career that is ever changing. When I got started we were shifting from fraction pricing to decimals... Traders had to adapt.
When the ecn's just started out you could watch a stock like emc and arb island and nyse all day... that went away. Price improvement strategies worked really well for years.... That went away a few years ago. Opening orders and MOC strategies have worked for years... for some they still do while others can't make since of them.
When one door closes another opens.
Now we can now short on a down tick.
Now we can automate.
Now we have powerfull software that allows us to watch arb opportunities in 100s of pairs.
Now we can back test.
Now the specialist is gone and black and white algos are the liquidity providers providing opportunities.
Now commissions are .005 or less.
To quote the Budha. The only constant is change. In trading change happens in hyper drive. Adapt............ or fall by the wayside.
What seems to be missing here is being part of a professional trading group that is interactive with their traders. Our Mentoring groups actually do have a vested interest in helping new traders.. top traders actually do share what they do with others. There are thousands of stocks to trade of course. The newer traders speed their learning curve up considerably when online every second of the day with their direct mentor/manager/team leader.
The "team trading" works very well within our affiliate groups because, believe it or not, multiple minds, several sets of eyes, can make more money than the "island unto itself" type trader.
Of course we respect the individuals privacy, and to be perfectly honest, our very best traders are doing something that I have no idea what it is. Intersting story. One guy who asked for some help with capital usage, strategies, all the normal stuffl, then went back to Europe to trade. Well, he made like $700k the first year, about $1mil the second, more the 3rd, even more the 4th. THEN HE WANTED TO "RETIRE" LOL. I told him "NO WAY" LOL... What you're goin to do is to teach someone else exactly what you're doing, back him, split profits, and STAY IN THE GAME. Well, he did just that, and now the "new guy" has made enough to "buy his freedom" and both are in our top 10 achievers.
My trading/programming group in Texas has been with us over 10 years, and they put all this in a good light. They explain that they love to share with traders so that other traders will share with them. The proverbial "sum of the parts exceeds" etc.
Our PairCo group has a full time analyst who saves hundreds of hours for our traders by continually updating our data base of hundreds of pairs with dozesn of comuns of analysis daily.
This morning, on our corporate "Morning Call" we discussed the quadruple witching, and the variables involved for today's openings and trading. As well as the Russell Reconstitution, every year very successful.
We can't be all things to all people, but we are very proud of our traders and their willingness to help out.
Anway, it's nice to have a good reason to share some of what we do in the "glass half full" sense.
All the best,
Don
The "team trading" works very well within our affiliate groups because, believe it or not, multiple minds, several sets of eyes, can make more money than the "island unto itself" type trader.
Of course we respect the individuals privacy, and to be perfectly honest, our very best traders are doing something that I have no idea what it is. Intersting story. One guy who asked for some help with capital usage, strategies, all the normal stuffl, then went back to Europe to trade. Well, he made like $700k the first year, about $1mil the second, more the 3rd, even more the 4th. THEN HE WANTED TO "RETIRE" LOL. I told him "NO WAY" LOL... What you're goin to do is to teach someone else exactly what you're doing, back him, split profits, and STAY IN THE GAME. Well, he did just that, and now the "new guy" has made enough to "buy his freedom" and both are in our top 10 achievers.
My trading/programming group in Texas has been with us over 10 years, and they put all this in a good light. They explain that they love to share with traders so that other traders will share with them. The proverbial "sum of the parts exceeds" etc.
Our PairCo group has a full time analyst who saves hundreds of hours for our traders by continually updating our data base of hundreds of pairs with dozesn of comuns of analysis daily.
This morning, on our corporate "Morning Call" we discussed the quadruple witching, and the variables involved for today's openings and trading. As well as the Russell Reconstitution, every year very successful.
We can't be all things to all people, but we are very proud of our traders and their willingness to help out.
Anway, it's nice to have a good reason to share some of what we do in the "glass half full" sense.
All the best,
Don
Running a prop firm/arcade/whatever-the-hell-you-want-to-call-it has risks and should be a profitable business. You are trusting traders with a ton of leverage and leverage goes up when volatility/risk is high. Attrition rates in trading are no secret, most fail, some make a bit and a select few make a ton. It sucks that out of every ten traders that opens an account only a couple will still be around in two years, but this is the reality of the business. Traders with an edge or traders looking for an edge need Prop firms, and even though they are not perfect it's still good that they exist. Obviously there are other places to go to realize your goals in trading (hedge funds, i-banks, etc.) and young aspiring traders would probably be well served working at one of these places as opposed to plunking down their $25k. But those jobs are few and farther between these days and highly competitive. Ambitious, driven people need a place where they can give trading a shot. Fact is, many traders take far longer to develop their skills than an employer would tolerate, others have "interesting" personalities, some are plain greedy, and some just don't want to have a boss or wear a tie.
Bottom line is that just because prop firms have a high burn rate of new traders does not make them all bad. The good ones also happen produce a disproportionate amount of millionaires.
Best of luck to the OP with his or her article. As Dustin mentioned, do lots of research. That means call some of these guys up like Don Bright, Echo, Assent and visit their shops. Don't trust everything you hear on ET ;-)
Bottom line is that just because prop firms have a high burn rate of new traders does not make them all bad. The good ones also happen produce a disproportionate amount of millionaires.
Best of luck to the OP with his or her article. As Dustin mentioned, do lots of research. That means call some of these guys up like Don Bright, Echo, Assent and visit their shops. Don't trust everything you hear on ET ;-)