Good point london. What you have shown is a spreaders nightmare. Co-integration implies they just can't get too far apart. Have you found some instruments that let you assume that?
1) The guy you are mentioning missed at least one item : psychology, and I'll add spirituality as he is now conning the gullibile 2) Putting the time is just one aspect. 3) Talent : they've worked it somewhere, somehow. May be the skills acquired were acquired somewhere else 4) Discipline : obviously trading without discipline is a huge no-no. At least we have time and discipline : everybody can learn that.
Just for the general info to most of the ET readers ( the pros already know this ), there are literally hundreds of spread trade combinations possible between the Liffe Gilt, Liffe Short Sterling, Liffe Euribor, Eurex Schatz, and Eurex Bobl contracts. So many inter-market combinations possible, just be mindful of duration and convexity. And Liffe does have an inter exchange margin spread credit agreement in place with Eurex which is nice. For you creative souls out there, the possibilities and dimensionality with spread trading is really cool.
Hi s0mmi, Thanks for sharing these great insights. I am have started trading recently in the Aussie futures market. Do you trade the calendar spreads in the Bill strip? Do you have any strategies you use in times of low volatility where its even harder to get fills? Cheers.
Hi friend I admit I have given the Billspreads a go. I got so blown apart its not funny. I was trading them wrong. But lets talk a bit about billspreads. The Bills are a short-end market. The shorter time-frame of the yield. It has a heavy weight with interest rate direction and pricing. Therefore, in the current half decade or so, it is stupid to trade the Billspreads and Bills if you are learning. If that's where your edge is, and you can't be bothered learning, then thats okay --> stick to your low volatility market. But if you are learning, there are much more diverse and better products out there. The problem with Bills and Billspreads is there is not enough two-way to justify day trading. To trade them, you will have to take real ideas on-board. "I believe Bonds will continue up-trending and pricing of rates will slightly change over the next week" for example. And Bills+Billspreads offer a big hit in brokerage. It would be wise to revisit Bills+Billspreads when Hyperinflation hits (if it ever hits) because the pricing of Bills and Billspreads will be out of wack. They will react to many things, and there will be much two way. Unfortunately, right now, all the money is it in Equities + Government Premium Pricing Risk in Bonds. This is why the current leader of the world is the long-end Bond Market (because interest rates are so dead in the short-term, all across the board, there is no reason to put your money there). Now to make things worse, Australia's short end market is generally a piece of sh*t compared to what is offered in Europe + America. There are less players. There is a BIGGER spread (less chance you make any profit). And there is less big guys doing things wrong. If anyone doesnt believe me, then go ahead and try it and be my guest. I wish you the best of luck. I have seen many newcomers into the bills, make consistent money, but then get blown on the first real move. Also, another thing that sucks -- the Asian market session is mostly dead. The world is following America right now. America = Australia's overnight session = Dead Bills. The Bills are a laggard of the 3yrs, which are a laggard of the 10yrs, which are basically revolving around the U.S. Tnotes All of this will change in the next year or two when interest rates start to deviate. So for now, if I were you, and I had options, I would look at the longer-end Bond market instead of the Short End. Why? Because you can DAY TRADE the longer-end Bond market, learn multiple setups, gain experience, and go through necessary character building experiences QUICKER than if you sat in a Bill trade for 4-days, and took your loss, then enter another trade, which paid you in 24hrs etc. Once upon a time when interest rates were going wild around the world, the short-end market was the thing to trade (I wasnt around back then). Pricing could change at any moment, with remarks from a Central Banker, to a big currency move, to unemployment, to GDP or other data... But right now, the Short-end bills market is dead because the market has listened to the Central Bankers. Which means they expect a long period of stable interest rates. Even if they do begin to raise interest rates, they are expecting a slow staircase increasing upwards. Maybe 1 rise every few months or so. It will be stable, and nothing to worry about it. Of course, anything can happen, but this is why the short-end market is dead and you are worth investing your time in the long-end market. GOod luck!!! Once again
Thank you for sharing the valuable information, Sommi. I'm curious how many trades do you take per day on average? It seems to me you're not a very active trader. But in the meanwhile you would scalp 1 or 2 ticks in the spread with size if a trade goes to your favor immediately, right? Would you keep a small core and continue to trade around your idea or try to exit all the position and look for other opportunties in the same market (for example, fading in the opposite direction)? It could be difficult for you to flip your bais when you trade more size. Another question is how would you compare trading at the your firm's office and home? Do all the expereiced trader of your firm trade at home? I always think a prop firm can provide a much better infrustructure. Thank you!
Hi S0mmi, it's been so long since your last post. How are you doing these days Are you still trading at this prop firm?
Hey mate, I went through the entire thread (after being recommended by traderdemarket69 in my journal), during a few downtime periods in the office today. I'm massively grateful that you decided to post here, I think we started at prop firms around the same time, I was at the beginning of summer in 2011. There's so much value in what you've posted and probably around 60-70% I can fully connect with and mirror your experience, some of it I haven't been able to explain to myself in the way you have. Here are a few of my observations. Bid/offer rebate monkeys - I never wanted to fall into this category, but half of the boys in the office still do, I knew coming into this business the same time as you that this was a piano key that probably couldn't be played over and over again given the algos. I wholeheartedly agree with your first post, although I didn't in the first 2 years of my professional trading career. I read books, a.. lot... of 'trading' books and they fully ingrain into you the importance of not averaging down, having a strict stop and trading a fully thought out plan. But we both know differently, the rules are very different in a high probability, sized up, mean-reversion trade. Scalping - without a doubt when you have a beast of a trade on the only way you can psychologically deal with the swings is if youre scalping a few ticks in your favour. I've learnt this at an exponential rate the last few months. Some of the guys here really jumped on the ROI 'issue'. As prop traders the ROI is irrelevant, in some of my best months I've made 50%+ on my margin amount. Some of the best prop traders make 1000%+ a year on their margin size... It's irrelevant, you've tried to explain it but it's a completely different paradigm to what's taught in books. You talk a lot about desensitising yourself to size - I found this to be a massive sacrifice in my life - I basically had to desensitise my personality to life and social relationships to be able to deal with the fluctuations objectively. Happily I'm over that hump and it only took a year, but people really don't seem to realise just what sacrifices you need to make in order to survive and thrive in this game. One criticism I have is that you seem to have greatly over-exaggerated the amount of risk you need to take in order to make bank. Maybe I'm reading this wrong - but if you're consistently taking 20k of risk to make 1k (like its every trade!)... there's something seriously wrong with your trading strategy. If however you mean that on average you make 5k while taking.... 10k 'hypothetical' risk but every now and then a 20k beast comes along that you manage to scrape 1k out of ... then I understand. I go through it continually with my trading - its just the price you pay for a high probability trade. One thing I'm strong in is detesting scratches. When I first got started the managers were soooooo happy if you either scratched or made a tick, with the occasional #loser, I realised pretty early on it was just because they made most of their money from round trips. So these days I'll go offside massively, but I'm not gonna scratch, I'll average the hell out of it but I'll wait until it goes to the other extreme before I'm getting out. Or of course I'll take a gangbang loss... either way I'm happy. I can take the gangbang, but not if scratching is one of the alternatives, gotta have a big pot to not care about a big loss. Also one of the boys at your firm posted here. I'd never show any of the guys I know posts from here so a massive amount of respect for that. For all of the ridiculously troll like replies you've had and the fact that you had one of the guys from your firm essentially critique you is commendable. However the 'trolls' and 'haters' have really added to this discussion for me allowing me to give context to some of the insights and limiting beliefs I've had on this journey. ------------------------------- My journey at my first prop firm began with the Bund/Bobl/Schatz spreads legging in with the outrights. I then moved into trading the 12 month DECDEC Brent spreads, a kind of 'baby outright' for 20-100 trades intraday for around 2 years. Made very little money but gained a good ability to feel momentum. I now trade the FLYs, Condors and Fly permutations of the spreads (2-3 times per day, with an average of 8-14 positions on) the average trade lasting around a week or so. Just look at the chart below - it's not the clearest but it shows 6*APRMAY -1*DECJUN over several months (btw price touched a couple of ticks above the lower horizontal line today). You can trade a consistent range, maybe it breaks equal to that range, but by that time you've already traded it several times with a few hundred lots and made more than enough to cover a loss equal to one win. Not to mention you have enough time to hedge that P/L loss away with a correlated spread. (BTW - here's a big 200-500k secret - in the energy markets the OCTNOVDEC and the APRMAYJUN are two of the most consistent range trades in the last 10 years - with enough size you can make a well above average trading living just trading around those two relationships - pull it up on CQG, its ridiculous) You've seen the scaling capabilities of spreads over outrights, take a look at FLYs over spreads - boring as fuck, but double then quadruple your clip and you're looking at one of the most consistently profitable medium term edges. It's not like straight spreads where all of a sudden price is trading 5 times higher than the last range. This is more like 1, up to maybe 3 times the range (very rarely), over a long enough period that you can hedge. I'd look into it if you have the limits and would like a more chilled out approach to trading. Also looking at things from a 'spread matrix' perspective will add some execution edge if you're not already doing so. However I don't think this is much of a thing in 'STIRS' more so in commodities. Would be great to shoot the shit here or over PM if you're still around, I think we've had some very similar experiences and show the same levels of enthusiasm. Very much looking forward to it Wingz