Time For a New Edge

Discussion in 'Journals' started by NY0BScalper, Mar 31, 2011.

  1. I've been successful trading C for quite some time. I have an intimidate knowledge of that stock and a bag full of edges. I know when to do what strategy and am masterful with execution and use of routes. It has gotten to a point where I truly am shocked when I have a down day. I wake up every day knowing I will be positive $300-1000. This month only had two days where I was negative in C, out of 23 trading days. While I'm not killing it, I'm able to grind out a nice living.

    On March 6th, 2011, D-day is coming. Citi will reverse split, 10:1, and become a $45 stock. Without going into details in my current strategy in C, I will say that I primarily exploit the spread and the rebates. As a $4 stock trading with a one-penny spread, the bid-ask difference is effectively .25% of the stock's value. Ergo, if I make the spread 20 times in a day, I'm making a 5% gain on the stock. Also, the rebates for adding liquidity on the highest-paying venues - BATS and EDGX, are $2.60 and $2.70 per thousand, while the rebate for taking liquidity on NSDQBX is $1.40; meaning I make between .05 and .1% of the stock's value (slightly less) just for getting in/out.

    Alas, C has 5 weeks left. It will be no more. There are no similar stocks. Calling a stock like SIRI similar is ignorant; it does 1/10th the volume. S, ALU do 1/20th-1/10th the volume of C but move completely differently and have much more risk for all my styles. I'm not going to try to trade those stocks because they'll sucker me into thinking I'm trading C and then bam, I'll take a huge rip.

    So the time is now to develop a new strategy. I can wait until May 6th, but then I will be heavily pressured to make money. Since I know my edge will die, I'm going to start working on new strategies in April. I'll still trade my bread and butter stock, C, and hopefully make next month what a low-income worker makes in a year. But my main focus will be on developing new strategies and learning.

    When I start out, I'll probably go into too much detail for my own good, which will be a chance for people to learn. The more I feel I'm onto something, the less specific I'll be with what I'm doing, but I'll still post results and trades.

    I think I tried creating a journal many years ago when I didn't know what I was doing but forgot to post in it, just like the diary my parents gave me when I was eight.

    My initial plan, which is subject to change based on my performance and feel, is to focus on the financial sector and mostly just trade BAC. I'll also be trading C after the split, while it is in-play. If after a week or two it dies down I'll probably leave it alone (my guess is it'll trade like a slightly thicker JPM, which is ick!)

    Either tomorrow or early next week you'll see my first entry.

    Hopefully I can find new edges, help others learn, and get helpful feedback from the community. Wish me luck.
  2. i remember spending months developing a strategy with UYG that was profitable live then one day - BAM - reverse split and the edge disappeared.

    Milk C for all its worth!

    I wish you the best on finding another edge in this market.
  3. Based on reading your posts I did not think you were a one trick pony, I thought you were a more skilled trader.
  4. Here's my prediction. You're gonna struggle quite a bit for a few months. Eventually you're going to take the knowledge you have (which from what I can tell is very good), the experience you've gathered and the passion you have for this business and become a much better trader than you are today.

    My recommendation is to forget the credit crap. Gross is where the money's at. Prices have always changed and they always will. That's where the money's at.

    A good trader can make money in GOOG then turn right around and trade that horrible sub $1 garbage. Don't be a one trick pony.

    Best of luck to you,
  5. Thanks Red. I appreciate the sentiment. Only since I started with C did I get addicted to ECN credits. In the past I have six figure differences between my gross and net (in the firm's favor, of course).

    I don't think I am, I know how to trade several strategies. I've only traded this way for about a year, prior to that I've had many different styles of trading. I gravitate towards the easy money. When I first started, the easy money was hitting the bid when a stepping short came in. Then I had a strategy just scalping high priced stocks on feel, I did okay with that for about six months. After that, I had another gimmick that worked quite well. Then, I had a real strategy that worked for 18 months and made good money. Then I went back to scalping stocks "in-play" and after some struggling made money. Then I struggled and kind of stopped trading for about 4 months and just banged girls and went out drinking every night. Then I started trading C. I didn't make as much money as from other things in the past but it was a nice, consistent, complacent way to make a good living.

    So basically, I am am ore skilled trader, and not a one trick pony... at least I sure hope so :D.

    Here's my March, 2011, ending today.

  6. So it's been almost a month since I started this journal and I've yet to make a single follow up post. I've been 50% focusing on trading C and grinding out the last of the free money. The other 50% of my energy (which will become 100% after May 6) has been on developing automated trading systems.

    A a scalper, many of my old edges have been taken over and shriveled away through competition by the HFT machines. While I won't ever be able to beat the machines on pure speed, sometimes just playing along - reacting to a price level changing, for example, can be almost impossible if manually trading.

    When I recently developed my first black box, I learned a lot about both myself, my trading abilities, and what the process of making an ATS (automated trading system) is like. I realized that not only am I capable of expressing my ideas clearly, but my thousands upon thousands of hours of screen time gives me many excellent places to start from. Old edges that haven't completely died but aren't worth my time to trade can be modified and then automated to a way that makes more money than I used to trading them manually, when the edges worked "better."

    This is just a quick post to let everyone know I'm alive and give a sense of what I'm doing. As far as how I'll go about this journal, I'm not entirely sure. I don't want to give away my edges or lead people on to trying what I'm doing, yet at the same time I'm sure there's a way I can A) help keep myself in check and B) give back to the community, all without hurting myself.

    The main difference in how I am going about developing the ATS is that I'm not using back-tests. I'm simply not aware of any software that lets someone accurately test high frequency scalping ideas. Furthermore, without a realistic order queue simulator any back-test results I get are at best suspect and at worst untruthful.

    What I do, instead, is have an idea of mine coded -perhaps not all the way, I'll usually start with something gray-boxish. Right now, for example, I have a box that makes money, but only in certain areas (chop). It trades chop very well, but can be decimated by a large trend. The box trades the chop, but doesn't know how to look for chop; right now when I see areas that I think it will work on, I type in the stock and run it. What I don't have yet figured out is the exact optimal place to run it, as well as what variations of the chop box work best. I write down different ideas for filters for when it should be turned on. The stuff that seems to work best will eventually get coded into the gray-box, making it a full black box. I'm taking one problem at a time and solving it by running different variations of solutions to the problem simultaneously and then recording the results. Whatever becomes best will be implemented into the final project.

    I would like to keep going but I have to get back to sleep. If anyone has any questions not involving specifics on my edge, I would love to answer them. Questions about my ATS development process are especially encouraged.

  7. What is your commission rate?
  8. bb3pt


    I am interest in making an ATS for my trading strategy. The thing is I know very little about it. Could you give me some pointers to where I can start learning more about it. What program do you use for your ATS (excel api)? Sterling is the platform I use for trading.

  9. Elder000


    Interactive Brokers has a wonderful ATS tutorial and detailed Excel on their website www.interactivebrokers.com you can use it to adjust to any other platform / broker.
  10. bb3pt


    Thanks Elder000! I was playing around with in on IB with the simulator. It will be nice if Sterling platform have a tutorial like IB.

    #10     Apr 29, 2011