There is more alpha when you break down an index or sector and focus on the more narrow parts. If you are trading "relationships" you want to be as narrow as possible. It's very hard to zero in on "broad" relationships with any kind of edge.
Despite the headache to Mav and Don this thread may have become, I think it is great. 2 people who know more than me answering valid, and false implications is great. I came close to making the leap, but was too lazy to study and make the leap. I make fairly good money on the futures side, but would be better off tax and trading wise using the leverage available through prop for my equity trading. I just have an issue with studying to do the same thing I do without a license. Thanks for spending the time here. In another couple of years when I'm done helping coaching kids, I may make the leap I should have made years ago. Hopefully these guys will still be here expressing their opinions. I think they are valuable.
Okay, that makes sense. But can you trade ETFs as frequently as you can any other liquid instrument such as stocks or futures, and are the spreads conducive enough to do so on well-moving ones? Also, I recall you mentioned something about spread trading with fairly large size. Are you going to time your trades technically, or will you be looking to buy something "cheap" while selling something "expensive," as you see it? And finally, do you see spread trading as necessarily less risky or potentially more so because of the presumably higher leverage and the possibility of a decoupling of the assumed relationship?
I didn't really intend on this thread being a strategy discussion thread but I'll extend you the courtesy and try to answer your questions. The ETF's I trade are very liquid with penny wide spreads. They are more liquid then most futures contracts. The trades are quantitatively based. They are not relative value trades. Spread trading is less risky and more importantly much smoother. The general rule of thump is they are inversely correlated to flat price in broad markets. Meaning, when markets are strongly trending, spreading can be choppy and messy. In choppy markets, spreading is very smooth. So since markets tend to be choppy and directionless 80% of the time, spread trading is smooth 80% of the time. These are just general rules obviously.
***ATTENTION before you listen to this psycho read this http://www.elitetrader.com/vb/showthread.php?s=&threadid=238087
I think Maverick should invite Don to this conversation rather then posting it up behind his back. OK, I didn't ask Mav to start this thread, and he had no reason to ask me or tell me that he was going to do it. I have always respected him, and respect his posting all this.This may not be the best "marketing" - but I really don't mind him posting realities of working with us. Mav has always been a straight shooter, and I would welcome a conference call with him and whomever wants to discuss any part of trading with us. I'm not giving him special treatment, no more than I would of any friend....or new trader that I don't know....doing my best to make them a solid Bright Trader. Don
Are you talking per hour? LOL. To everyone. Mr. Mav and I are actually friends. I have spent time listening to his needs, and trying to help him and his trading partner. I do that with everyone who joins the Firm - we are "hands on" - that is as big an edge as just capital and financial security. Look, a couple of extra steps to help a long term, profitable trader is good business....and, just the way I like to do all my business. No big deal overall. Don