I think the bread and butter of a lot of locals is making money by taking the opposite side of orders that come into the pit or "paper". Locals have the execution edge. Locals also have the information edge: they can see who is buying and selling. Off floor traders don't have execution edge, but do have the edge of being able to wait for their setups. This is not to say that some locals don't put on directional trades, spread March ES against June ES or intermarket spreads such as trading the mini contract against the big contract with a partner. You are also correct about learning when (and when not to) pull the trigger as being as important as the edge. It takes time to learn the skill of being able to take your setups with no hesistation, and to avoid bogus setups that really don't fit your criteria but look so tempting. It is all about seeing the market for what it is, and not for what you want it to be, and training yourself to react correctly and immediately under stressful situations.
Trading a spread is a hedged position, long March short June, not a pure directional play; trading 5 minis against 1 big is an arb, they are fungible.
absolute majority of non-directional strategies is used by institutions, partly due to 1) their sophistication 2) execution and technology capabilities needed to implement them 3) high capital requirements mooox, if you're able to access those strategies, good for you, most of the "mortals" can't.
Traderkay, The question asked was what strategies do floor traders use, or for that manner, institutional traders; not what the average trader does. The answers address that. In response to your points: 1) true 2) the most important 3) not necessarily, but it doesn't hurt 4) experience, you forgot this one.
One other point, non-directional strategies can be used by any trader. The margin on a spread is a fraction of a naked contract and certain arbitrage opportunities don't require a significant amount of capital; the time in a trade is very, very short allowing a trader multiple round turns a day.
But Dave, how much did you start with before your account became 60K? I hope it wasn't 100K! I see your are in Leesburg, FL. Is that close to Tampa or Miami?
deepitm I know of Temple. Havent been taking his signals or nothing but I have taken all of the free info from his site. Dont know how good he is but the man seems to have anice strategy goin on. I tried it in simulator on my ENSIGN but it didnt exactly work. Perhaps cos I didnt do it well, perhaps cos its a sim etc... OK, - I have a real problem- I have been reading and educating myself too much and trading too little. Of course not to forget that im way undercapitalized to do what I initially wanted and thats daytrade stocks. I guess with 5k it was futile from the beginning and now PDT screwed me completely up. As I have started thinking about the minis -ES- I have been reading the FUTURES forum extensively and one thing that I have concluded is this : Nobody who really trades for a living does it with your average Qcharts/public indicators/etrade account (or IB for that matter) but rather tape reading illiquid stocks-playing the spec (praetorian comes to mind ), highly sophisticated mech. trading futs (tntneo springs to mind), OR some tactics I cant even begin to understand like arbing, pairs, deltas, gammas, bloody, bugger, etc... Now a million dollar Q: IS THIS REALLY TRUE? Tnt, were you thinking of this when you said theres no spoon? I mean, theese are the real market dynamics but I highly suspect that someone like me, from God forsaken part of Europe, with 56k dial up and no access to trading books can begin to learn about them and even less take advantage of it. Seems that this is the only way to do it AND to have lotsa money and be able to try like a zillion things and ditch the ones that suck. After 3 and a half years I just may go to my real estate business....... theres a growing interest about Croatian coast among American investors . Good trading to you all Alex P.S. I am affraid to even ask would it be recommendable to a newbit to try and scalp ES for 2-5 ticks with only 4+k in acct???
neo, I don't know why everybody scalps it seems very difficult to get ahead over time and too intense for me. I keep just 5-6K in my account for margin and try to catch big moves in ES with a small stop, 0-3 entries per day. Would like to keep overnight as I think it's the way to go but wait for some P&L cushion. Down about 10 points so far after 3 months, 50 % losers, rest is scratched trades.