What kind of techniques do heavy scalpers use?

[CFerret]

Quote from jack hershey:

I apologize.

Sorry.

LOL, actually I was expecting that other people would better apologize.

But I am satisfied that at least they stopped a destructive part of a discussion (so far).

Your dispute with people like Dr. Brett even when you don't agree with each other always stays a constructive discussion of different trading approaches. And that is always useful for people to read (unlike "who's a guru and who's not" posts).

Janis

 

[CFerret]

Quote from alorainc:

Janis, I don't know if I have the answer, but I have a theory on the answer. It has to do with big money, being in a position they want to move into or out of.

If you trade the ES, and trade 1, 3, 6 contracts at a time, I'd imagine that 90% of the time you can get out with no more than a quarter point slippage. This allows the option to pick and choose when and where you get in and out, at any given price.

However, if you trade 1,000 contracts at a time, you do NOT have this luxury, because you know your buy or sell order will move the market, and possible to a point that would eliminate your profit.

So, to avoid plunging or bouncing the market several points, incurring massive slippage, and losing your shirt...

You have to WAIT until someone BIG is sitting on the bid, or ask, "signaling" that that they are willing to sell 1000, or buy 1000 contracts at a particular price. Then, you would have to start selling/buying at the price they were willing to take/give.

Here's an analogy. You are a farmer, selling grapes at an open air market. But you don't have a few grapes to sell, you have 5 truckloads of grapes. For you to sell them and still make money, you can't sell these grapes to just anyone who walks buy. You won't ever sell them fast enough to make a profit.

you will have to wait for a major supermarket to stop in and make you an offer.

Then, you either take the offer, or you wait a while longer. In the meantime, your grapes could spoil.

So, when a big bid or offer comes in, if it is reasonable, you TAKE IT.

In other words, when a big 500 contract bid shows up 3 ticks below the current price on an ACV, it is a 500 contract SELLER than is pushing the price down to meet that offer. Why? because they need to MOVE their inventory fast. Market exposure = risk.

To them, 3 ticks below current price is a hell of a lot better than rotten grapes.

Anyway, I hope this gives an idea...I would welcome comments, opinions, etc as to whether this concept is indeed true, or if it just sounds that way in my head

Greg

P.S. VSTscalper knows his game well, so if he says something works, it does...Keep kicking it and taking names Bill, I'll drop you a line in the next day or so.

Very interesting reasoning Greg, thank you! Need to read it with more attention once again before expressing any thoughts on it.

Janis

 

[Bernard111]

Quote from Spydertrader:

This might help. If you need a translator (LOL) let me know.

- Spydertrader

I will need a translator...but I'm trying to learn the language and the glossary, meanwhile!
Thank you,
Bernard

 

[skippy]

Quote from alorainc:


In other words, when a big 500 contract bid shows up 3 ticks below the current price on an ACV, it is a 500 contract SELLER than is pushing the price down to meet that offer. Why? because they need to MOVE their inventory fast. Market exposure = risk.

Thanks for this beautiful, lucid explanation. I do have one question, though.

You write, "when a big 500 contract bid shows up 3 ticks below the current price on an ACV, it is a 500 contract SELLER than is pushing the price down to meet that offer". But wouldn't such a hypothetical order represent a standing BUY order? After all, if this individual has a standing bid three ticks below the market, isn't s/he, in effect, your proverbial supermarket purchaser saying, "i'll buy 1000 crates of grapes for three ticks below the last transaction price?"

This would explain why markets often "run to size". Here's a guy offering to buy 1000 contracts. Someone/someones are gonna want to do business with him. So, do I have it right here? Or am I missing something?

Thanks again..

 

[john99]

alorainc,

That makes it sound like the market revolves around 1 large farmer who is only selling 1 product. Your example would sound better if we said there are hundreds of large farmers all wanting to sell their product at a better price relative to where they bought it, hence open auction price movement. If you use volume based market profiling and software tools like marketdelta, you can see where the majority of the large farmers have accumulated positions. This information is useful on the longer time frame.

For scalping done in seconds, the edge comes from being able to sell on the ask and buy on the bid. If you are a retail trader, don't expect to be able to buy the bid and sell the ask in less then 5 seconds when you only trade 5 contracts on ES. I'm sure everyone has watched the time and sales and seen for example 226 contracts print on the bid and then 2 seconds later the next print is 226 contracts at the ask and then you see the price is back at the bid. What just happened? Was that 1 trader that just scalped a tick or was the 2 traders, 1 that lost a tick and 1 that gained a tick holding 226 contracts? How many retail traders do you know that trade over 100 contracts per trade and at the same time don't lease a seat with CME? Ask yourself, who are the guys that get fills on the bid when the price is on the ask?

 

[jim c]

Quote from john99:

alorainc,

That makes it sound like the market revolves around 1 large farmer who is only selling 1 product. Your example would sound better if we said there are hundreds of large farmers all wanting to sell their product at a better price relative to where they bought it, hence open auction price movement. If you use volume based market profiling and software tools like marketdelta, you can see where the majority of the large farmers have accumulated positions. This information is useful on the longer time frame.

For scalping done in seconds, the edge comes from being able to sell on the ask and buy on the bid. If you are a retail trader, don't expect to be able to buy the bid and sell the ask in less then 5 seconds when you only trade 5 contracts on ES. I'm sure everyone has watched the time and sales and seen for example 226 contracts print on the bid and then 2 seconds later the next print is 226 contracts at the ask and then you see the price is back at the bid. What just happened? Was that 1 trader that just scalped a tick or was the 2 traders, 1 that lost a tick and 1 that gained a tick holding 226 contracts? How many retail traders do you know that trade over 100 contracts per trade and at the same time don't lease a seat with CME? Ask yourself, who are the guys that get fills on the bid when the price is on the ask?

John. Its a very level playing field and being a member doesnt just automatically jump you to the front of the line. At least not in the ES or any other stock index future that Im aware of. I know Eurodollars for one does give some advantage to the members or the bigger players but nothing like that going on in the ES. Its first in first out and the size you trade has absolutely nothing to with where you are in line. jim

 

[trader225]

You guys watching time & sales may be the biggest losers. Think about it. If you get your data directly from CME it is aggregated. If you get it anywhere else, it has not only been aggregated by the CME, but delayed as it works its way through your provider's tick farm, where it may be filtered and re-aggregated.

Another thing: no provider can send a ticker to every subscriber at once.
What is your priority?
Who gets the data before you do?

 

[jim c]

Quote from trader225:

You guys watching time & sales may be the biggest losers. Think about it. If you get your data directly from CME it is aggregated. If you get it anywhere else, it has not only been aggregated by the CME, but delayed as it works its way through your provider's tick farm, where it may be filtered and re-aggregated.

Another thing: no provider can send a ticker to every subscriber at once.
What is your priority?
Who gets the data before you do?

So do you think someone out there is getting time and sales that is NOT aggregated? Someone out there is getting better or faster quotes than your typical reatil trader? I think the answer is no. A memeber on TT sitting in the clearing firm might have a few milliseconds on a retail trader but I would bet the advantage would be very small if any at all. jim

 

[dcraig]

Quote from trader225:

You guys watching time & sales may be the biggest losers. Think about it. If you get your data directly from CME it is aggregated. If you get it anywhere else, it has not only been aggregated by the CME, but delayed as it works its way through your provider's tick farm, where it may be filtered and re-aggregated.

Another thing: no provider can send a ticker to every subscriber at once.
What is your priority?
Who gets the data before you do?

I think that latency is not as critical as you suggest except perhaps for very high frequency automated systems. Also, it's not just T&S (processed for market delta or whatever) it's T&S in combination with DOM.

 

[CFerret]

Quote from trader225:

You guys watching time & sales may be the biggest losers. Think about it. If you get your data directly from CME it is aggregated. If you get it anywhere else, it has not only been aggregated by the CME, but delayed as it works its way through your provider's tick farm, where it may be filtered and re-aggregated.

Another thing: no provider can send a ticker to every subscriber at once.
What is your priority?
Who gets the data before you do?

It doesn't matter much. For me this information about scalping techniques is more important for better understanding of different market participants interacting.

I am not going to join their battle for every single tick.

But T&S and DOM are valuable confirmation tools and knowing how they act and what they show definately will not make trader's life more diffucult.

P. S. I've read Alorainc's post once again and it really describes battle for better execution of large sizes very well and it confirms many thing I see on the DOM. One of the best posts in the thread!