I am glad my thread has such a devoted following. Kiwi, Redduk, thank you and welcome. My first reference to "non-HSI Trader" was here: http://elitetrader.com/vb/showthread.php?s=&postid=1679854&highlight=non*HSI+traders#post1679854 I made no reference to anybody, especially not to kiwi because I do not know him, and has no reason to call him anything. Kiwi took it upon himself to say that I called him a non-HSI Trader. LOL Be my guest. So I replied to him, which you quoted above. LOL. Thanks again for posting on this thread. The reason I started this thread is stated here: http://elitetrader.com/vb/showthrea...ght=reason+i+started+this+threads#post1679854 I am sure kiwi posted his "knowledge" is because he wanted to share his devastating experience with the spread. Just because he does not know how to handle the market clues (the narrow, then wide, then narrow spread sequence) does not mean that I should hold it against him.
LOL ET ... you're arrogant to the point of funny. I'm guessing that'll pay off in your trading. Personally I stopped trading HSI because of a number of factors. The primary one was that it had gone "wild" after the Shanghai traders arrived and the tight stop strategy I used was invalidated by huge gaps. I built an alternative strategy that worked but I didn't "like" it so it seemed more useful after 3 years of trading nothing but HSI to have a shot at adapting to some other markets instead. I spent over a month experimenting with KOSPI, SPI, STW, Nk and the currencies that trade during my "day." So now I trade SPI, STW, and a currency having adapted from the fast and fairly disorderly old HSI style to their orderly and initially staggeringly slow styles. The adaptation was interesting and has probably made me a considerably better trader. The interesting question (for me) will be whether I choose to go back to the HSI later when it drops into "normal" behaviour --- if it does later this year or in 2009. The comparison you make between ranges and spread is actually wrong. The reason its wrong is that spread doesn't account for risk ... its just an indication. Your comparison was: Code: range spread value hsi 700 5 0.007142857 es 22 0.25 0.011363636 ym 240 2 0.008333333 But the spread of 5 is not representative of the risk involved. With ES (or STW or NK) you have some depth with rare exceptions (news events typically) then your stops will have little slippage beyond the spread. With HSI in its current mode (assuming its behaving as it was in the earlier thread still) the gaps will give slippage way beyond the "5 point spread." Back on 11/15 I posted some pictures of gaps from that day: 11, 17, 22, 28, 38 points so thats: 2, 3, 4, 6 and 8 times the 5 point spread. Anyone considering trading HSI should evaluate the likely slippage against their stops vs other available choices not just the (probably thin) average spread. Just imagine the joy when your 20 point stop becomes a 58 point stop if you lucked out on the worst example from 11/15 (in the good old days I was using stops below 9 points for targets of 30-70 points so you can see how a fairly serious adaptation would be called for ). As always, do your own homework, but do do your best to assess the risks intelligently.
Totally concur with what Kiwi wrote above. I have experienced it myself, and switched to DAX as a result. Kiwi, How come you did not choose Kospi, I have seen daily volumes for its options, and it is bigger then us. Regards, redduke
Its on my secondary list and I keep thinking about creative ways to take advantage of the OTM options. STW and SPI were really nice trendy markets and I added a currency purely for something uncorrelated (sometimes the stock indexes are too close to correlated for me).
Funny thing is I have just the opposite experience with HSI in the shape it has become lately... LOVE those 1000pt range days and huge swings. Never seen a better breakout instrument. Slippage of like 10-20pt regularly happens indeed, but I simply price it in when counting risk of the trade. When HSI was dull like it was April of 2007 things were much worse with it for me...
I agree with ET99 and CFerret, we all know adaptation is the key in this game. The real traders spend time and effort adapting the new market conditions and the pikers spend time whining at the market or at the broker. switching to other markets is also a form of adapting. no offense to anybody here.
As we all know there are many ways to profit from trading. Kiwi and I choose to switch the markets, ET99 and CFerret love the new behaviour on HSI. To each its own, after all break out trading is one the method, and not a bad one at all, as it was demonstrated by Mark Fisher in his great book "Logical Trader" However it is not for me. Regards, redduke
What I have demonstrated is Static Unit Measure of Risk between the instruments. What you are alluding to is Dynamic Trading Risk. Someone mention that 5pt spread in HSI is a lot. Thus I shown the calculation that 5pt spread in HSI is no more wider than 0.25pt in ES or 2pts in YM. Dynamic trading risk is there, but it is a different discussion.
What you have observed is correct. Thank you for posting the charts. A few reader posted to say they see your observation. But what you have posted is only half the picture. To understand what is happening, you have to look at the event in its context. What you have failed to observe is that the spread varies, from a narrow spread (as little as 1pt) to wide spread, then back to a narrow spread again... and the sequence repeats. The spread varies for a reason. If you don't understand the reason, then what you see is noise. If you understand the reason, then what you see is signal. You got wacked by the wide spread and made a decision to step back. I respect your decision. You must be a very street smart trader. And a profitable one at that. Anybody who does not react to changing market condition will get slaughtered. You could have asked: Why the spread? How to deal with it? Instead you chose to call me a bullshit artist and a wanker.