It all comes down to capital. Retail traders are conditioned to have small stops and do more spins as they lack capital.
The S&P 500 has topped at 2430 on 6/1/17
- Thread starter volente_00
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It all comes down to capital. Retail traders are conditioned to have small stops and do more spins as they lack capital.
Well, yes, but, whereas you could be sitting on a trade that is down 50 points, the retail trader might be up over 100 points by having played many of the twists and turns, and in the direction of the immediate trend, not necessarily just the trend of the 8 year bull market. If all you ever do is go long after all, as an institutional trader, I don't see why you're getting paid the big bucks. Any retail guy can just go long in his account and leave it alone for years.
Obviously if you're an institutional guy you're playing this differently, but since most at ET are retail traders, trying to learn from whatever you're doing (assuming even that you're highly profitable), would be a killer.
Having a bit of institutional experience myself, IMHO that's a bit of a fallacy and I would humbly offer up that your typical institutional trader would not be able to simply fade a strong trending market and allow that position to mark against him for a sustained period of time - unless it was a hedge. Even institutional traders are held accountable. Institutional Desk Managers get paid bonuses on performance metrics. And traders under their charge are simply not allowed to fuck up said performance metrics - the leash is not nearly as long as retailers imagine.
Thanks for the feedback. I too would think that an 85 point ES stop is just silly, no matter how well capitalized any institution or individual is. I only used this because @propwarrior said that he was comfortable going long when the ES was 2435, and "A break below 2350 would cause (him) to get flat."
Saying this though, I have no idea what firms, that aren't HFT firms, use as potential targets and stops. From reading countless posts, its apparent that a retail guy would use anywhere from a 1 to 5 point ES stop, perhaps even more for a swing trade, but what everyone else might do I have no idea. (and it certainly doesn't matter much, aside from just it being interesting)
Well, common sense prevails. Say you manage a trading desk. You have five index traders. Your Russell, your Nasdaq, your Dow, your FTSE traders are each up $XYZ. They've been managing both long and short positions on a swing trading basis - taking losses and letting winners run a bit. Let's say the Portfolio Manager pays out a six month bonus to his Desk Managers. Do you honestly think that that Desk Manager is going to let ONE jackass keep adding to a losing position that's been largely underwater since February ? Fuck NO. gone baby gone. The Risk Manager and the PM wouldn't stand for it either. No way that they let ONE guy piss away their year. Not only that, this one compounded position starts to really impact firm margin and risk metrics on a disproportionate basis.
Does not happen.
It's possible that the majority HEAD of a fund might make a highly directional, levered bet provided that he's got a iron-clad gate on customer funds. But unless he's right without much in the way of pain he'll lose most all of those clients once they are able to withdraw - even if the bet was highly profitable.
Investors and Fund Managers are incredibly risk averse quite frankly. More so than many retailers would imagine.
Does not happen.
It's possible that the majority HEAD of a fund might make a highly directional, levered bet provided that he's got a iron-clad gate on customer funds. But unless he's right without much in the way of pain he'll lose most all of those clients once they are able to withdraw - even if the bet was highly profitable.
Investors and Fund Managers are incredibly risk averse quite frankly. More so than many retailers would imagine.
Very interesting take. There is something to be said though about a retail guy bailing too soon. I have seen in my years of research some traders who appear profitable by selectively adding to losing positions. Perhaps its not a losing position in their eyes, more so buying lower to make the average entry price better, and this works almost 90% of the time. Of course when it doesn't work, you might be finished, but I think it does certainly have some merit.
There is obviously a mathematical way to analyze this, and most day traders would not have the financial means to carry a position like this, even perhaps taking into account the time involved, but I imagine that this is something an institution does more so than a retail trader, and especially if they are building up a position.
So that said, the million dollar question is, is someone building up a position in the ES and NQ at these attractive prices?
(or are they trying to dump everything they have!)The really wealthy traders I've come to know over the years knew how to press the living shit out of a winner. Successful swing traders by and large don't add to a losing position. But once a position starts marking up on a consistent basis feel free to press the living snot out of it. That's how it's done. Then scale out of your winner.
Out of curiosity, what were they trading? Stocks? Futures? Options? Most of the older posters here from at least a decade ago were trading stocks from what I gather.
Doesn't really matter IMHO.