For spreads that are not exchange supported, and the bid/ask is not tight enough to reasonably use Automation - I personally leg the spreads. I will always execute the most illiquid product first. I try to split the difference and won't risk getting cute; if, for example, I get hit on one bid I will immediately hit the bid on the other leg. Hope that helps.
SpreadProfessor Clients - Thanks !
- Thread starter bone
- Start date
With IB you create a combo by adding the instruments in the 3rd tab after you choose combo - directed for a particular instrument you're adding. It'll say "no guaranteed, do you still want to add this?" and you say yes. You'll then get synthetic prices and you enter as normal. There are various options IB has for dealing with combo order entries to try and minimize leg-in risk. Not an autospreader though.
Yes, indeed, I use this extensively and it also provides the spread margin, although that feature could be improved to specify margin requirements for both trading hours as well as after-hours in the same display. The key point that bone confirmed is that you don't create any obstacles to filling the remainder of the order once the first leg is filled. More important to get the whole thing on and be hedged than to try and squeeze out some price improvement.
Hi Bone, would you expound on this a bit. Certainly overtrading is not a positive behavior. Have you learned anything that would lead you to be able to better filter out poor spread candidates before entering?
Not just applicable to spreads but all trading. Only choose good setups. If you commit to so-so plays then keep it small or preferably don't enter at all.
The issue is that you don't know what's a good setup til after the fact. Maybe over time you've defined some rules which allow you to rank setups as to their profit potential. Just wondering if Bone has learned anything that has caused him to adjust his method or did he simply observe that if I didn't take certain trades my results would have, in hindsight, have been better.
Let me just opine on how I have tried in my own trading and in my client work to enforce selectivity and positive outcomes .
Take discretion and emotion out of trading. Don't force a trade. No set-up will ever be perfect, and I could nit-pick any trade I ever took or will take. But take the set-ups that fit your system design criteria and pass on the ones that don't or you feel "borderline" about. Design a system that is as "apparent" as possible. You should be able to look at a chart with your system and know in five seconds if it's worthwhile or not.
Keep a folder of trade set-ups that you think might not be ripe at the moment, but show good promise in the future. We call this "stalking" and we track them.
Over the years I have evolved and refined and distilled my approach. In terms of design I have tried to make my trading system as mechanical and simple as possible in terms of the indicator package and the rules set. ( firm believer in Occam's razor ) I have endeavored to engineer as much discretion as possible out of the rules set. I have four major rules that cover trade entry and trade management ( stop-loss, profit target).
When I traded in the pits and my early days screen trading futures on a proprietary basis, I really had no choice but to limit my product focus to just one or a handful of instruments. This approach can hurt selectivity if you are swing trading or position trading. (since scalpers have to hyper-focus, anything beyond a single product might be tough) Having a very large pool of products to swing trade helps selectivity immensely. To me, electronic markets are awesome in that respect. In terms of spread trading, there is just so much more to it that the first three expiries of a contract or the obvious stuff that everyone has been doing since 1980. There is just so much more flexibility and opportunity creating spread combinations.
Finally, I've made it plenty apparent to potential clients that I see significantly better outcomes for clients who paper trade my system for several months before they risk live capital. There is something to be said for proving a system out to yourself over time and through various market conditions and gaining confidence. Eliminating mistakes and especially not repeating mistakes is the fastest way to build account equity.
Bone,
If you look back over the years at the really bad ass traders you've known, the Market Wizards that no one has heard of, were the majority of them discretionary or system traders?
Regards
If you look back over the years at the really bad ass traders you've known, the Market Wizards that no one has heard of, were the majority of them discretionary or system traders?
Regards
I have found through the years that a trader labeling himself a "systems" trader can easily sabotage the rules and protocols he originally established, and that's where the trouble usually starts - and snowballs from there. Could be from boredom, could be impulsive, could be anxiety.... Who knows. Better rules compliance - usually in the areas of trade management and position sizing, will improve any trading system. We set our profit target and stop- loss at the time of trade entry.