New SEC rule has me crying...

Discussion in 'Trading' started by ronniejack, Aug 14, 2001.

  1. Fohat



    Don't put words in my mouth. I confirm, that your conjectures of what I COULD have or may have thought go up against the facts, are incorrect and belong to you and your posts and are not shared by me.

    That's why I'll confirm and repeat the following <b>FACTS</b> :

    <i>1. Stock/option commissions at all pro firms <b>I've seen</b> are more expensive than commissions at such EDAT broker as IB.</i> (for <25k accounts which we were talking about)

    Proof: At IB the commissions are: Half a cent($0.005)for the 500+ shares part of an order and 1 cent a share ($0.01) for <=500 shares. $1 minimum.
    Option commissions are $1.95/Contract. No ticket charges. No extra fees.
    (I have an account with IB and other brokers). There's no extra data feed fee at IB, while most of the pro firms have very high data fees, because of the pro status.

    There's no pro firm that I've seen that has lower stock/option commissions than IB. (The Echo, you've mentioned also has higher commissions than IB - on top of per share fees it has ECN surcharges, high data fees,exchange and SEC fees.) Therefore: IB wins in low cost, Pro firms loose.
    (I'm also including some of the 120+ regular, web based, EDAT and other brokers i follow !!!

    <i>2. To short on a downtick at a pro firm one must use "bullets" which <b>usually</b> cost three times or more the regular commission, while with Futures there's no need of "bullets" - one can short "at will" on a downtick with the same low commission.</i>

    <i>3. To sum up, futures trading has real advantage over trading at a pro firm:
    It has higher leverage, lower commissions, "short at will" and lower data feed costs, than the higher commissions, lower leverage and very expensive "bullets" and datafeed at a pro firm. </i>

    TraderJimR, to prove the oposite, please don't put words into my mouth, but instead give some facts i.e. a pro firm broker with lower commissions than IB etc.

    P.S. By the way I'm also looking for such lower commission EDAT (pro or non pro) stock/options broker.
    I'm also looking for lower commissions/fast executions electronic Emini futures brokers. Patsystems Jtrader trading platform and some FCMs' (Futures commission Merchants) that provide it are very promissing.



    <b>Count the facts, ignore the speculation.</b>
    #11     Aug 14, 2001
  2. "I have to fundamentally disagree, though, with recommending full-time futures trading to someone whose entire portfolio consists of $15K. My opinion, and my opinion only, and this comes from a decade of experience, I don't recommend full-time futures trading to anyone with less than $50K, and only then if they are not relying on this money to live on. I have seen guys get absolutley creamed when they are on the wrong side of news (likewise, being on the other side of that is very profitable).

    I know some millionaire futures traders, but in my own experience, I have found many more ways to limit risks in the stock market than I could in futures and for myself, stocks have been a much more profitable experience. "

    It's good to be cautious in futures as well as NAZ illiquid
    issues. Futures is dangerous precisely because of the
    leverage and speed at it can turn. Also there is the execution risk if you trade pit traded contracts(Bonds,live SP) Trading on Globex and other electronic exchanges is somewhat less dangerous, the size of the contract is
    smaller and executions are good. Liquid and fast !!!!
    I agree many ways with your notions just wonder if you measure futures trading with the "old yarstick" which may
    not apply to electronic futures as much. Being on the wrong side is the same in NAZ or e-mini just the severity will be
    different. I agree and would caution anyone who does not
    have experience with futures - be patiend and scalp first !!!
    #12     Aug 14, 2001
  3. Magna

    Magna Administrator


    Nice to see you back, calm, no name-calling. Your insights and experience are always welcome when you remove all the excess emotionalism.

    Somehow I knew lurking wouldn't suit you and that you'd be back posting, didn't figure only a 1-2 day holdout, but whatever.
    #13     Aug 14, 2001
  4. I felt very bad for the original poster !!!!

    #14     Aug 14, 2001
  5. Fohat,

    Just for the record, I have never traded with IB but from what I know, I am very impressed that they can offer all they do at the rates they do. Clearly this isn't easy as no one else does it. If I were non-pro, I would undoubtedly trade with IB.

    Most of the pro firms cannot (or choose not to) compete with IB. I am just saying that you made a blanket statement that NONE of them can. Depending on how much volume you do, the one pro firm that I know of that can is ECHO.

    Here are the facts (the first one uses the IB charge from the page you posted a link to):

    10,000 share NYSE or AMEX order:
    --IB-- $52.50
    --ECHO-- $25.00

    20,000 share NYSE or AMEX order:
    --IB-- $102.50
    --ECHO-- $25.00

    For big-volume traders they have a deal that gets them down to .80-cents a share, this would mean:

    500 share NYSE buy order
    --IB-- $5.00
    --ECHO-- $4.00

    500 share NASDAQ SuperSOES order, ECN fee added:
    --IB-- $5.00
    --ECHO-- $4.50

    There many instances where their rates are almost identical, and instances where IB wins. I was not trying to make my examples one-sided, just giving the examples of when IB is not the cheapest and a pro firm is.

    As for data fees, I pay no data charges at all to trade there. For all remote traders that do over 300,000 shares a month, they eat the entire amount. So the "higher fees" you claim I am subject to are $0.00, so I fail to see the disadvantage.

    And don't forget, this includes fully functional software with charts, level 2, baskets, integrated Island book, alerts. For free. From what I know about IB it is Java based and does not include all that.

    Again, I think IB is great, by far the best non-pro firm. But there are some pro firms that offer a great deal.

    #15     Aug 14, 2001
  6. andrasnm

    Did you post something after the message above or is there something wrong with my computer? There is this huge blank space. If that was an accident would you mind hitting the edit button and erasing all of the return keys pressed?

    #16     Aug 14, 2001
  7. Hitman



    First of all I would not recommend options trading, whether swing or intraday. If you are not very profitable with stocks, do not play with options. The increased leverage with the fact that you can not cut losses effectively with options unless hedged, can spell disasters during your learning curve. I really don't think options is a good day trading vehicle (Fohat, I think praetorian does swing trades and/or hedges with options, not his primary day trading vehicle for sure) because of the spreads, there are elites who can do it I am sure, but definitely not newbies.

    I have read many many advertisements for trading futures and I don't understand why people compare this to trading stocks. It is two completely different game! When you trade futures or QQQ/SPY, you are at the front line, every tick of the market, there is no tape to read, Level 2 probably doesn't mean anything (I may be mistaken on this), you lose two of the most powerful weapons a stock trader have right off the bat. You have no leading indicator because you are already trading the leading indicator, you have no sector leaders / indexes for confirmation. You lose two more weapons a stock trader use frequently.

    All you have is a daily chart and an intraday chart, nothing more, and I hate to say this but anyone with under 25K probably never traded positions as big as 800 shares of QQQ. There is no easy news money (this morning's RLX move was totally predictable before the market even opened), no "choppy market but this specific stock/sector trended". My hats off to those who trade futures successfully as their primary trading vehicle, you guys are the true elites!

    Sounds like a horrible trading vehicle for newbies. Yes, there are people who will probably do better in futures than they do in stocks, but I suspect they were already profitable in stocks before they took on options. Fohat, can you please tell us 1) if you are profitable (read: making a living) in futures and 2) how long it took you to get the game down and how much capital you had when you started and how much did you lose before you turned the ship around.

    My suggestions (and believe me, those are your only REAL choices):

    1) Find a real job and build 25K! Honestly, it is not that tough, I had more than that when I was 20 years old before I started in this business. You may need to build up some more cushion than 25K just in case you blew out some of it. Honestly, if you really want it, you will find a way to get 25K, it is not THAT hard, get two jobs, save like crazy, you CAN make it. Believe in your dream, and it will come true.

    2) Find a professional firm that DOES NOT REQUIRE your own capital to be on the line. Fohat obviously never worked for one and has the typical sour grape syndrome, let me explain:

    a) None of your own capital is on the line, you are trading with firm capital. You use professional equipment and software provided, supported and maintained by the company.

    b) Depend on the firm, you will either get a very low starting salary plus a very low pay out, or no salary and high (70%+ before you even get your first check, since most people takes 3-6 months to go positive and that is best case scenario) payout.

    c) There is no data feed charges at most of the firms I have worked with. You have nothing to lose (other than your time), and you have everything to gain. Right now, with 10 month's worth of experience, I am comfortably in the black (48K YTD) and a 94% pay out. If you have the gift, you can do 10 times better. Not happy with 94%? After you fully develop your skills, your wing is fully grown, go trade with your own money, no risk (other than time which is what you have to put up if you were trading on your own), high reward. You are NOT liable for any losses you incur at those firms, there people who quit down 20K or more . . .

    d) High caliber teammates, much higher quality than your typical Internet chat rooms. You will be exposed to traders who are a hundred times better than me, and sometimes just a tip or two from those guys can be vastly helpful.

    e) Bullets. Fohat made me laugh on this one. Everyone can short on a downtick via futures/QQQ/SPY, it is not an advantage anymore. With stocks, only those equipped with bullets can sell on a downtick, and trust me, when used properly, it is a plain unfair advantage. Sure if you are good you can make a lot more money than me even if I have access to bullets, I am sure Michael Jordan can beat me in basketball with one hand tied behind his back, but at equivalent skill levels, it is a HUGE edge. You (and other professional traders) worked for the S7, S55, you deserve an edge over the homers in slippers. The short side is often a lot smoother than the long side (fear > greed), and go gun them down!

    f) Potential gigs such as your own trading desk, hedge fund, and many more, have to be a pro to play.

    g) Did I say your OWN money is NOT on the line? Isn't that enough for you to make the decision? You don't need to be an Ivy Leaguer either, I got into my current position being a college dropout.

    h) Six months into the game I was given 1500 shares 14 positions limit, how long will it take for a homer to reach that level if they started with 25K in their account?

    Bottomline, no one can beat the commissions at IB, for all practical purposes (it will take a very long time for anyone to start a position with more than 4500 shares, only after that point Echo's commissions kicks in, and most pro. firms do not offer flat rates like Echo does). Half a cent per share is way too good. (My firm can get it to as low as 0.75 and for a few select guys 0.70) Although I honestly don't know how long can they keep this up

    That said, being able to trade mega positions with none of your own money on the line is too big of an edge, and IB is way out of league in term of advantages. If you live anywhere or can relocate to near the New York area, Boca Raton Florida, San Francisco California, give a shot. Or visit one of the many professional trading firms in your area, such as Echo (although I recommend a firm that doesn't require capital contribution, you milk them as much as you can during your learning curve).

    This long post is not intended to be an advertisement, it is simply someone who was given an opportunity to max out his potential someday, and whether he succeeds, or blows up, he will be forever grateful of being given the opportunity in the first place.

    Get your own opportunity, it IS possible . . . There is no contest, I would recommend you going pro if at all possible even if the SEC didn't do a 25K limit. I think if you join a pro firm you may end up thanking them for doing you a favor, pushing you to the right side . . .
    #17     Aug 14, 2001
  8. tymjr


    Not for me. I couldn’t make shit on the Q’s. Poor fills. Actually, that’s not completely true. A lot of my problem revolved around my frustration with the fills or lack thereof. I’m sure some traders have no problems with them.

    I think that is definitely wise. I really worry about any undercapitalized trader migrating to the futures because of the new regs.

    I also agree about with the “old yardstick” comment, but I would also caution any new futures traders to be aware of what can happen during an announcement. Being on the wrong side of a fast market can be devastating to your account and, more importantly, to your confidence. Barring the completely unexpected, take the time to learn to detect when these types of situations might arise.

    It also scares me to think that some traders have no offset capabilities in times of emergencies. I believe you are courting disaster if you don’t get yourself a back-up broker.

    There are leading futures indicators.

    I don’t know about the “easy” part but I use the news to my advantage at times. Possibly, not the same degree a stock trader uses the info, though.

    I was profitable in futures first. I tried stocks. I sucked.
    #18     Aug 14, 2001
  9. Hitman


    Can you tell me what leads futures? I trade stocks but I am very sure it will come in handy.
    #19     Aug 14, 2001
  10. tymjr


    Ahhh. I knew you were gonna ask that? Shoulda kept my mouth shut. I put it out there for any traders who might be searching for such an idea. All I can say is my partner trades stocks and he has found it only mildly useful, as he trades stocks that are uncorrelated and it is very short term. Don’t think it’s something you would like much either, Hitman, as it is more of a calculation than a tape reading skill. No disrespect intended. In fact, respect intended.

    P.S. It is by no means a lock. I just use it in the same fashion as a stock trader might use the futures on a short-term basis.
    #20     Aug 14, 2001