I'm trading about 10,000 QQQ on Island 2 or 3 times a day. For the last 6 months I have tried to figure out whether my strategy should be to just hit the bid/ask, or if I should wait and let someone try to take me out. I have my own trading strategy that is not dependant on scalping a few cents here and there very quickly. I hold all my trades for between 15 to 90 minutes. I want to definitely be in the trade, and don't want the price running away from me, so that favors hitting the bid/ask. But on the other hand, I hate having to pay someone else's price, I am giving up the spread on each trade when I do this, fortunately its only about 1 cent to 1.5 cents on QQQ most of the day. But Island changed their pricing structure, so now I have to pay another 1/4 cent per share to Island if taking out the shares. If I added shares to Island, there are so such charges. But here might be the deciding factor for me on this matter. Every time someone takes out my price, the momentum of the trading activity seems to carry several cents right past the price I ended up getting, so am I really now further ahead? Sure, I didn't have to give up the spread, or pay Island a fee, but the momentum of getting my price taken out puts me instantly down for the first 30 seconds anyway, or so it seems. I might as well have just hit the bid/ask, at least that way I am guaranteed to get my trade, the price won't run away from me, and the momentum won't necessarily always be against me instantaneously. Plus I often trade very late in the day and don't exit the trade until the closing bell, so that allows me to control precisely when I get out, and not end up holding the trade for several minutes after the closing bell, which is something I don't want to end up doing. Plus I don't have to worry about partial fills, I hate paying the full fee for 2000 shares, getting only 100 shares filled, then having to cancel the order and chase the price. Lately my strategy has been to get into and out of my trades in blocks of 2000 shares, by consistently hitting the bid/ask 5 times in blocks of 2000 to get my 10,000 shares. I pause 5 or 10 seconds between each order entry. I figure at least this way I can hit the bid/ask and not have to overpay too much on the spread, I figure I would lose a lot more on the spread if I wanted an instant fill on all 10,000 shares all at once, rather than in smaller pieces. Does anyone else have an opinion on this? Do you think I am entering and exiting my trades as efficiently as I can, given the fact I definitely want to be into and out of a a certain trade at a certain time? Also, has anyone else noticed that if you put a bid/offer out there, and someone takes out your price, the momentum of the trading usually caries right past that price level for the next 30 seconds of trading anyway?
I guess your entry signals are pretty tight else you would consider scaling in and out of your 10K blocks? i.e. for 3K each ... ok this equals 9K 36.00 35.75 35.50 bidding on island for example? or are current daily ranges too small to do this? Have you considered using E Mini nasdaq futures instead? 1 NQ mini = 800 shares
I considered nasdaq futures but any halt in their trading would really screw up my trading plan. The last thing I would want to have happen is have the futures trading halted when I had a position in them. I am satisifed trading QQQ on Island, I am making money, I'm just looking to squeeze every last cent out of the trade in terms of my entry and exit strategies, thats all. And I wanted to get some other opinions. In terms of scaling back, I don't want to do that. When I want in, then I want in NOW for all the shares I wanted for the trade, not now for some of them and perhaps some later. Liquidity is not an issue, so its no problem, you can trade 10,000 QQQ on Island instantly almost any time of day, it just seems to me you'd give up less of the spread if you did 5 trades for 2000 share 10 seconds apart, instead of one huge trade for 10,000 all at once (when hitting the bid/ask)
Exactly my point. If you buy the whole block you would definitely be better off with the eminis. Take this: The spread is usually one tick, which corresponds to 1.25 CENTS ($0.0125) per share of QQQ, plus if you want to trade the equivalent of 10400 shares of qqq, you can do that by trading 13 emini contracts, which you will almost always all get at the inside bid/ask. If you use InteractiveBrokers, your margin requirement for such a position is somewhere around $55000, only half of that between 9:30 am and 3:45 pm (please check to make sure my numbers are still correct), if you ever hold it over night, you don't pay margin interest, and now cometh the really good news: You total commission (including all fees) is $2.40 per trade per contract, which means $31.20 per trade on your 13 contracts.
Provided you have the necessary capital for the margin requirement, what keeps you from offsetting your futures position using the QQQs if futures are halted?
your strategy for the QQQ seeems to be working and it appears you are trading using the momentum to feed into the qqq this should net you a given 1/4 per day or so am I right. The market swings in the qqq allow for opportunities and I think that hitting the bid with that size on a high volume day is wise but how have you done on the low volume days? Whats your success ratio?
ok, for one thing, like my name says, I am a canadian trader. IB does not accept canadian accounts, most US brokers don't. They will accept any country in the world EXCEPT Canadian accounts. They're all scared of some obscure Canadian securities law which I find absurb, because they aren't even operating in a Canadian jurisdiction. I am with JPR Capital and even though I can get a futures account with them, but they want to charge me $11 per round trip. So I would be paying double the broker commissions. But trading in both would require me to have a lot more capital available. I have a certain amount set aside for trading and I trade the full 4 times margin on that account with QQQ. But if I wanted to trade futures, and have the option to switch to to QQQ at any time if trading in the futures was halted, I'd need a lot more capital, either that or trade with less margin power. Because then I have to set up 2 accounts instead of one, they are not interchangable, at least not at JPR, because they have different clearing firms. Like I said, I trade up to 90 minutes at a time, and if NQ is down 4.5% at the time I want to go long, it severely limits me. I do not want to be in a situation where it is down 5% and the futures get halted while I am long, and I continute to lose while they are halted with no opportunity to get out. Of course I could get out just before they reach that 5% level, but that's not what I want to do, I want to hold the trade, but have the option of getting out if I choose to do so, not have to deal with halted futures. So for the type of trading I want to do, it just seems to me like QQQ is what I should be trading. If not for the potential for halted trading, I would agree that the futures are the way to go, but given the fact they get halted sometimes, I just can't see myself wanting to trade in them for what I had in mind. Which brings me back to the original issue I discussed in my original post.
CD; You're asking an age old question. Yes those edges given add up. However who wants to miss making half a buck for want of two cents. Analyze your trades mathematically. Lets say in a sample of 100 trades your average outcome is a 10 cent profit. If you saved a penny each way in and out (.02 total) you would increase your profitability to .12 per trade. However if you miss more than $2.00 in winners over your 100 trades due to being unable then you've negated the advantage of "working" your order. When you're wrong you always get filled, just at a better price. When and if you're right, you'd better have the trade on. Only your diary or backtesting can tell you whether to wait or step out.
Thank you for explaining that to me. I have always wonderes why such a lot of people trade the QQQs. You have made some good points.
It seems like you are trading around $75K US; if you can get $1K margin on the futures, you could put $15K in a futures account, keep $60K in a stock account, allowing you the advantages of trading futures and the capital to hedge in your scenario. Not perfect, but what is? You can circumvent your Canadian problem by setting up a US or offshore LLC, for around $1K. Should more than pay for itself @ your level.