Trading like a Local

[bearcats1980]

Quote from SPARtrader:

making a video turned out to be a pain in the ass so I'm not going to bother.

buying the bid and selling teh ask is indeed the idea I have, but there is a bit more to it than that, like other traders competing for the same fills, managing trades that go against you as well as trades that go in your favour, and so on...

earning the spread, IMO, is only one part of it.

I'm not sure i'm 100% clear on your idea but if you are posting bids and offers hoping to buy the bid or sell the offer, by the time you get filled you will be buying the offer or selling the bid (in other words what was the bid will now be offered and vice versa. This is particularly true considering the size you are talking about posting and the markets youre talking about doing this in (ie ES and other equity index futures markets?).

There is a whole lot of this going on in STIR and some ag markets but probably 90% of the volume posted at a given price is either paper or very large locals who are posting upwards of 400 lots (at the least). How do you plan on gaining edge with your size? can you elaborate?

The way I interpreted it, your edge would be buying the bid or selling the offer, correct? If the bid turns offered or offer turns bid would you still have your edge or would you lose it?

Can you elaborate?

 

[SPARtrader]

Quote from bearcats1980:

I'm not sure i'm 100% clear on your idea but if you are posting bids and offers hoping to buy the bid or sell the offer, by the time you get filled you will be buying the offer or selling the bid (in other words what was the bid will now be offered and vice versa. This is particularly true considering the size you are talking about posting and the markets youre talking about doing this in (ie ES and other equity index futures markets?).

There is a whole lot of this going on in STIR and some ag markets but probably 90% of the volume posted at a given price is either paper or very large locals who are posting upwards of 400 lots (at the least). How do you plan on gaining edge with your size? can you elaborate?

The way I interpreted it, your edge would be buying the bid or selling the offer, correct? If the bid turns offered or offer turns bid would you still have your edge or would you lose it?

Can you elaborate?

Hi,

Sure I can elaborate. I think some people seem to be jumping to conclusions from the first post I made.

"buying bids and selling offers" sure is a nice idea, but i know it isn't that straightforward. that bit of what i said might be a bit misleading, but i have said that there is alot more to it than that. like i done expect just to put limit orders in the book and wait for the money to roll in :_)

what I mean by "trading like a local" is bridging the gap between punters going long and punters going short. for someone like me its impossible to compete on both (like have orders next to each other), so I have to widen my "spread" a bit.

the horseracing example i gave pretty much sums up what im talking about. I'm fed up of trying to punt on the right horse at the bookies prices... instead I'll just try t play middleman bewteen one punter and another one.

 

[bone]

Quote from SPARtrader:

Hi,

Sure I can elaborate. I think some people seem to be jumping to conclusions from the first post I made.

Well, since the term "local" ( as we know it here in Chicago as it pertains to an independent floor market maker ) implies extinction and a craft no longer viable, maybe the premise... that is, the ability to buy bids and sell offers on a consistent and profitable basis, is perhaps flawed.

 

[SPARtrader]

Quote from bone:

Well, since the term "local" ( as we know it here in Chicago as it pertains to an independent floor market maker ) implies extinction and a craft no longer viable, maybe the premise... that is, the ability to buy bids and sell offers on a consistent and profitable basis, is perhaps flawed.

Hi Bone,

I know you are a respected guy here on ET, and I don't want to rub you the wrong way.

But there are still screen based locals, right? In Chicago, New York, frankfurt and London (or wherever the computer is), "locals", as I understand it, are still an important piece of the picture in the liquid futures markets, bridging the gap between buyers and sellers.

What i meant by people jumping to conclusions was that i would just keep posting prices and get filled, that i didn't understand fill rules, or that 5 profitable trades would be wiped out in one losing trade, or that there was no need for discretion in the trading decisions.

 

[bone]

Quote from SPARtrader:

But there are still screen based locals, right? In Chicago, New York, frankfurt and London (or wherever the computer is), "locals", as I understand it, are still an important piece of the picture in the liquid futures markets, bridging the gap between buyers and sellers.

Google the name "Paul Rotter"

Note that he is no longer doing what he once did.

But don't let me discourage you any further, it sounds like you're game to get flipped and bled out by the bots in short order. Easy money. Go for it.

 

[SPARtrader]

Quote from bone:

Google the name "Paul Rotter"

Note that he is no longer doing what he once did.

But don't let me discourage you any further, it sounds like you're game to get flipped and bled out by the bots in short order. Easy money. Go for it.

I've read about Paul Rotter, thanks. Is that all you have to say?

 

[bearcats1980]

Quote from SPARtrader:

Hi Bone,

I know you are a respected guy here on ET, and I don't want to rub you the wrong way.

But there are still screen based locals, right? In Chicago, New York, frankfurt and London (or wherever the computer is), "locals", as I understand it, are still an important piece of the picture in the liquid futures markets, bridging the gap between buyers and sellers.

What i meant by people jumping to conclusions was that i would just keep posting prices and get filled, that i didn't understand fill rules, or that 5 profitable trades would be wiped out in one losing trade, or that there was no need for discretion in the trading decisions.

Locals are indeed a very important piece of the picture...someones gotta take the other side of paper. I traded 20k contracts yesterday as a "local", 30k the day before, etc, etc. Youre on the right track with your desire to "get edge", but you'll bang your head against the wall trying to figure it out on your own.

You need to find a firm or an exchange member that will back you or that you can clerk for and learn the trade. If they are a CME, eurex member chances are they know what they are doing and have a way to make money. Posting bids/asks and hoping the bid stays bid after you are filled is very common in the fixed income markets but can only work in a relatively calm and liquid market where you are posting upwards of 500 contracts. You cant play that game on your own. You would also have to be willing to quit whatever your job is now to start at the bottom at some firm or as a clerk for someone. This is how it works. Chicago or London is your best bet.

 

[bearcats1980]

Quote from SPARtrader:

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.

This is not the way to do it. Rather, make the commitment and find a firm where you can learn. Good firms will train you from scratch and wont make experience a prerequisite. Good firms have their edge already and wont require you to bring them edge. Look at all of the established options MM outfits. They hire undergraduates with no trading experience. They do that because they already have the strategies and want smart young graduates who dont have family commitments to employ them.