Trading like a Local

Quote from bone:

Well, the simple fact of the matter is that there are precious few "locals" who make money these days. The markets are too fast and too efficient to effectively buy bids and sell offers as a core strategy.
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Hi,

I have read a few of your posts on ET, so thanks for contributing :-)

But to your point, I think just trying to buy bids and sell offers is now the realm of co-locators and computers. I agree that a human just trying to do that will end up being too slow/inefficient.

But, I think, that does not mean that there are better times to "open the shop" to buyers and sellers than others, and I think (hope) that it takes a human to decide when these times are, it's not something that can be programmed into a computer.
 
Quote from PhiliC:

It can be done, but there are a few caveats to it.

The gentleman who started the post thinks you get filled immediately - doesn't work that way as someone else mentioned. Forget the sim - that's not reality.
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Hi,

what caveats please?

As I said in another post, I understand fill algos and stuff. I don;t expect just to post bids/offers and wait for the cash to roll in :-)
 
Quote from tomahawk:

Don't forget that locals pay practically nothing in commissions, and that alone can make all the difference with the kind of scalping you are talking about. I have a friend who trades in the S&P pit, and he makes his living flipping 100 lots for a couple ticks at a time all day long, at something like .10 commissions. He also of course has the benefit of seeing the commercials coming to the plate and is able to step in front of their orders.

So I would just urge you to consider that while you're trying to bang it out on the screen paying $4/RT, that is your competition.
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Yeah, commissions are something on my mind. I think overall plan will be build a track record and then try to get in a prop shop with much lower commissions than I'll start out paying. Leasing seat on exchange is also possibility depending on progress.
 
Quote from booked:

and what if it runs away from you? you take a hit that is 2,3,4,5x the size of your winners? You would get raped if it pushes one way or the other?

I would be careful about it on sim too, remember you have queue position in the live market, some sims can just fill you instantly when the market trades at that level, it's not like that, you actually have to get filled after those in front do.
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Hi,

Obviously trades can go against you, but earning the spread (I think) doesn't just mean taking one tick winners. You could ride it up 4 or 5 (or 40 or 50) ticks, the idea is that you get in on one side and out on the other. The ticks inbetween are, in essence, "noise".

Also, from watching markets, I think that it's OK to hold a position that has gone against you by a small amount, and still try to earn the spread but on a trade that has gone against you. But, small movements in one direction tend to bring about bigger movements in the same direction, and before you know it you are sat on a massive loss. I guess it's just a case of knowing when "too far" is and paying the spread just to get out ASAP. and the discipline to do it!

I have traded off a DOM before (no strategy, lost money, stopped), so I know about order cues and stuff.
 
Quote from bone:

Well, the simple fact of the matter is that there are precious few "locals" who make money these days. The markets are too fast and too efficient to effectively buy bids and sell offers as a core strategy.
More...

Hi,

i agree that if it was just a case of posting bids and offers then a human being would be outperformed by a computer (I think at least).

But, I think, the overall market which absorbes all the "flow" is mostly a limited number of humans (like a big poker table), and if you can see where another human is caught somewhere, you can start posting your own bids/offers to give you a little bit of an edge. I think (hope) that this part of trading needs a human to do, not a computer.
 
Quote from tomahawk:

Don't forget that locals pay practically nothing in commissions, and that alone can make all the difference with the kind of scalping you are talking about. I have a friend who trades in the S&P pit, and he makes his living flipping 100 lots for a couple ticks at a time all day long, at something like .10 commissions. He also of course has the benefit of seeing the commercials coming to the plate and is able to step in front of their orders.

So I would just urge you to consider that while you're trying to bang it out on the screen paying $4/RT, that is your competition.
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I am aware of that, but how does he determine when the are buying or selling outright vs. hedging? I don't think they would telegraph their moves that easily?
 
Quote from SPARtrader:

Hi,

i agree that if it was just a case of posting bids and offers then a human being would be outperformed by a computer (I think at least).

But, I think, the overall market which absorbes all the "flow" is mostly a limited number of humans (like a big poker table), and if you can see where another human is caught somewhere, you can start posting your own bids/offers to give you a little bit of an edge. I think (hope) that this part of trading needs a human to do, not a computer.
More...

There are a few markets that algos have dominated just yet.
 
the idea of 'earning the spread' as a strategy has always interested me, although I don't think i've ever really understood it, so i'll look forward to your video.

What market would you do it on?
Could you do it on the ES? Wouldn't you want something with a big spread and something less liquid?

When people have spoke about it to me in the past, they make it sound like free money; ''just buy the bid and sell the ask and pocket the spread'', but that makes me instantly skeptical.

cheers
 
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