A aside from the fact that you cant even hear your own voice and you could be punched in the face for no reason, I dont understand how these guys trade... The only view into the pits I have is from cnbc, and clips on youtube, and I never see any charts, t&s screens or anything! Where do they get their news from, and how do they follow price action?... WHY even bother trading in the pits? 1) trading at home is less stressful, and easier 2) you dont need a million dollars for a seat
Specialist are a front runner; few ticks multiply by volume and you can make a killing; in theory of course.
Pit trading puts you right where the execution is taking place, so the execution is better than trading at home. This is a definite edge. In addition, being the pits gives you a pulse on the markets... the intensity of the pits lends itself as a market indicator as well as who is buying/selling. Being able to surround yourself with successful traders is great as well. If you're wondering how pit traders trade without electronic indicators... they have different methods and systems which don't depend on reading indicators (ie. price action). Any indicators they use, such as moving averages, they update manually on hand charts by drawing them in.
I was lucky enough to get a tour a year or two back on the NYSE. They use hand signals or instant messages to communicate. Everyone carries around mini-computer things that allow you to go back and forth with your team. You get quotes on them as well. When you're buying/selling you still need to push your way in and make yourself heard.
I've always wanted to trade in the pits. But like you, I've been watching all of these videos on YouTube in the last couple of weeks from the pits. I don't know how they consummate a trade with the screaming, pushing and shoving. If a trader points to you and hand signals a trade, how are you sure he wasn't pointing to the guy 6 inches left of you, a row behind you, etc.??? But on the other hand, you get important Fed info two minutes before everyone else, ala yesterday.
I work as a lean hog trader at the CME in Chicago for my own account. I see open outcry markets as very efficent and sometimes more so than the Globex system, as I trade on both. Big order flow and executions come in through the pits, so you can see where the real action is. We don't usually have charts up, as its in our head where the market has been all day. Remember, we're trading the same exact thing every single day for 6-8 hours. Sure, seats are expensive, but they do hold their value. It amazes me that my CME seat is over $1 million.
right. So once trader "A" and trader "B" agree to a trade....what happens?..do they have to sign their name on some kind of document, do they have to make a phone call?...how is the transaction done?..all i ever see is people yelling at eachother..how are trades actually made?? cm
They send a runner/assistant over to confirm the trade. I don't know how often it is done throughout the day.
Open outcry in options is still going strong. Futures pits execute little these day's other than calender spreads. The âedgeâ was no FIFO and rock bottom commissions. The drawback was the compulsion to fade institutional orders that were a lethal combo of large and right. Standing in front of freight trains. Believe me, the pit did not ever know any thing of substance earlier than Goldman, Solly or Lehman etal. And yes, the risk of thinking you made a trade that went to someone else was a constant worry.
so for every trader in the pit, there has to be some guy next to him that runs around confirming all his trades?.. why not just trade with the person standing right next to you?...or is the pit divided in half by buyers/sellers?