I don't know where you are getting this idea that you can trade unlimited size. This is often a fantasy by newbie traders who dream of making trillions trading. Once you start trading with real money you learn that execution is critical. And size does not afford you good execution. Over time, that negative vig is going to kill you. This is why most prop firms and most hedge funds have tried to perfect the art of execution vs the art of trading. You can't just put on unlimited size as a position goes against. How the hell do you think you are going to exit that position if you are wrong? Case in point, LTCM. They traded size in treasuries, both on the run and off the run as well as emerging debt. The size was not an issue until they got squeezed. Once they got squeezed they could not get out of their positions. Ultimately they needed the Fed to broker a deal to liquidate their positions.
The ACD Method
- Thread starter sbrowne126
- Start date
I don't know where you are getting this idea that you can trade unlimited size. This is often a fantasy by newbie traders who dream of making trillions trading. Once you start trading with real money you learn that execution is critical. And size does not afford you good execution. Over time, that negative vig is going to kill you. This is why most prop firms and most hedge funds have tried to perfect the art of execution vs the art of trading. You can't just put on unlimited size as a position goes against. How the hell do you think you are going to exit that position if you are wrong? Case in point, LTCM. They traded size in treasuries, both on the run and off the run as well as emerging debt. The size was not an issue until they got squeezed. Once they got squeezed they could not get out of their positions. Ultimately they needed the Fed to broker a deal to liquidate their positions.
CMI another chart that makes this latest up leg in the market seem so stretched.
This is a great subject. There were some articles last year about how Paulson (the hedge fund manager) was in the unenviable position of having other hedge funds trade against him soley due to his size. I may have posted this. Look at John Arnold taking down the canadian guy, they knew what his position was to the penny. Sometimes its just a poker game. Just for fun how many es contracts do you think you could trade before you draw attention to yourself?
I don't know if it's a question of how many. There is an old saying, "they"ll let you in but they won't let you out". You can trade as big as you want to get into a trade but if the market moves against you, it's very hard to move size, even in ES. Most of the size displayed on your DOM that you are looking at is not real. It's implied. They are arbing the SPY, or spreading against something else. When the market starts moving fast, the arbs walk away. A perfect example of this is watching the time and sales on the ES DOM during a fed meeting or a job report. Hardly any size trades at each tick. ES can move 10 handles in a minute with very little volume trading. Of course when we are in a 2 handle range for 3 hours, sure, trade all the size you want. LOL
interesting I remember the big option guys were always hedging with the spx contract. I would assume most institutional market makers aren't holding a couple thousand eminis, size punters on et are a different story though. I think the poster may have been asking is acd scalable. I will let you address that one, have a great day.
Quote from kinggyppo:
interesting I remember the big option guys were always hedging with the spx contract. I would assume most institutional market makers aren't holding a couple thousand eminis, size punters on et are a different story though. I think the poster may have been asking is acd scalable. I will let you address that one, have a great day.
Sure, ACD is scalable. But trading size is a very different ball game. I would argue that the preponderance of under performance in mutual funds is not because of dumb fund managers but poor execution. Back in the day when day trading was easy, we would jump ahead of these large mutual fund orders and ride them. We basically forced them to pay up for stock and puke at the lows. We lifted offers ahead of them and smacked the bids. It was amazing how easy it was. They just had so much size to move in a short amount of time. Now, they use pretty advanced algos that do a decent job of getting in and out of positions very quietly and slowly. But that is a good example of how moving size can kill your performance. It's also why small daytraders can make huge gains trading in and around these elephants. That is until the HFT's showed up. Now the HFT's are trading in and around the manual day traders and eating their lunch. It's just the natural order of the food chain.
I never used wide stops for ES. And your argument would mean that no one can trade debt profitably either because if they could they would own the world being that the treasury markets are 100 times bigger then the ES. These arguments are of course ridiculous and nonsensical.
mark fisher was the GOD of the NYMEX trading floor. that book was written when open outcry trading was still the only to trade nymex commodtites. electronic trading has really changed the market place. i dont think the ACD method could be sucessful in the new electronic trading world.
There are 700 pages before you that say otherwise.