System Distribution Kills Profitability?

Discussion in 'Strategy Development' started by Scientist, Jun 4, 2003.

  1. I'd like to know is what other ET members think about reduced profitability of widely used trading systems due to distribution?

    I mean, with a trading system like the eMesa for the e-mini's - If eSignal sends an email to (probably millions) of eSignal users, with potentially hundreds of thousands subscribing to it, how much could it potentially reduce/negate the profitability of the trades? Or are the eMini's simply too large to be influenced by such factors?

    Any comments (preferably by eMini / futures traders) are appreciated...

    ~The Scientist :cool:
  2. They only wish they had millions of users.
  3. LOL. Yeah. :D

    If they had 1 million users, they'd average about $50 million a month, wouldn't they? That's more than 97% of US companies make....

  4. PetaDollar

    PetaDollar Moderator

    First answer the system independent question:
    how much volume does it take to move the emini market.
    Order of magnitude, you'd need 10,000
    knuckleheads subscribed to the same service, assuming they
    all take the signals (which they won't). But just for fun assume
    they do.

    With emini's you also have the issue of premium. If 10,000 knuckleheads pushed it up(down) you'd have a situation where
    the mini is trading at a huge premium(discount) while the big contract is just sitting there. So I doubt they'd move the stock
    market. I'm sure this would bring in lots of shorts(longs) to the minis.

    The half of the knuckleheads who got in late are looking at a loser. Many get scared and get out. Now you have the opposite effect.

    So I believe, in the end the knuckleheads would just introduce volatility.

    In reality I believe most who buy a system would not be able to follow it, and perhaps even start trying opposite trades. Another reason to believe it won't move the market.

    Which brings us to a question. Is it illegal to give or sell a signal on eminis like it is to pump an OTC stock that you own (without disclosure) and dump it when everyone jumps in?