Trading like a Local

Discussion in 'Financial Futures' started by SPARtrader, Oct 4, 2011.

  1. hi, long time lurker, long been interested in trading, about to give it a go.

    So I read alot of threads about "edges" and "systems" and "strategies", and whether the euro is fucked or not, whether the dollar is fucked or not, QE3 or no QE3, support and resistance, overbought and oversold, swapspreads, operation twist, whatever whatever whatever...

    and I think to myself, guessing can only be right half the time, let alone enough of the time to give them the holy grail of "consistent profitability" or "positive expectancy", or have the "edge" that makes them act on information (the right way) faster than everyone else; honestly I don't even know if there are "edges" that are real that arent like insider info or front running, or whatever.

    So, you know, like how can you make money from trading if you don't have a "system" that means you know something nobody else does?

    Well, I think, the way to make money from markets is to be a local. to quote bids and asks and to earn the spread**. Like there will always be people wanting to buy and sell futures in everything. The trick to makign money, I think, isn't to buy it with the hope of it going up, or sell it with the hope of it going down, but instead is to sell to and buy from the people who are punting.

    I mean, if you can buy at the bid, and sell at the offer, the tick that you make could be enough to make up for your fixed costs and commissions yeah? yeah, you could buy the bid and sell the offer 10 ticks lower, but honestly I reckon there is enough noise on a tick by tick basis (maybe even in a long term trend) to just work the spread and ride out the peaks and troughs in the mid price. Even you could say, if it goes against you, get out on the offer ASAP and "ride your winners" .Obviously because of leverage and everything, you can't hold a position forever, but I rekon you could put some volatility measure on your fill price, and account for crossing the spread to get out (because you have a leveraged balance sheet) every now and again. So I mean even of you have to cross the spread 4 times out of 5, you could still make money.


    ** now, I aint sayin that earning the spread is easy, cos there are lost of people in the same game. But the way I think about it is that bookmakers at horse races make money, beacuse they over-round. Sometimes they get done on a favourite winning, but their bread and butter is making markets for punters.

    I also aint sayin that just making bids and asks is all you gotta do, I rekon there are good places to make bids and bad places to make bids, and places where you shouldn't make nothing at all. Just saying that, i rekon, the spread is a PROPER edge, and so tryin to make is it a PROPER strategy.

    Making markets for punters is the type of trading I hope to learn.
  2. Yes, lots of peeps doing it, so it can be done, if you don't get greedy and stoopid.
  3. thx for the comments, what I said first off doesnt read very well.

    have you got any pointers for trading like this? in the next day or 2 i will show you a video of what i think i mean (on sim), its a new idea of trading for me
  4. I don't have any pointers, but you'll find people that do in a chatroom that arab started. Go to and you'll find people who do this.
  5. booked


    and what if it runs away from you? you take a hit that is 2,3,4,5x the size of your winners? You would get raped if it pushes one way or the other?

    I would be careful about it on sim too, remember you have queue position in the live market, some sims can just fill you instantly when the market trades at that level, it's not like that, you actually have to get filled after those in front do.
  6. bone

    bone ET Sponsor

    Well, the simple fact of the matter is that there are precious few "locals" who make money these days. The markets are too fast and too efficient to effectively buy bids and sell offers as a core strategy.
  7. Ummm, no.
  8. PhiliC


    It can be done, but there are a few caveats to it.

    The gentleman who started the post thinks you get filled immediately - doesn't work that way as someone else mentioned. Forget the sim - that's not reality.
  9. Don't forget that locals pay practically nothing in commissions, and that alone can make all the difference with the kind of scalping you are talking about. I have a friend who trades in the S&P pit, and he makes his living flipping 100 lots for a couple ticks at a time all day long, at something like .10 commissions. He also of course has the benefit of seeing the commercials coming to the plate and is able to step in front of their orders.

    So I would just urge you to consider that while you're trying to bang it out on the screen paying $4/RT, that is your competition.
  10. Hi everyone, thanks for reading, I will answer questions as best I can:

    Well yes, of course it can run away from you. the hard bit will be knowing when is "too far" and getting out ASAP, just by crossing the spread. From watching the markets, my idea is that they move exponentially - it's OK to hold positions that have gone against you a small amount and try to get out still earning the spread (albeit on a losing trade), but if you hold too long it soon escalates into too big a loss.

    I guess it will just come down to awareness and discipline, I don't expect no easy ride.

    Also, I have traded from a DOM in the past (without a proper strategy, lost money, stopped), so i understand order queues, fill algos and stuff. I am waiting for Trading Technologies to make a new release which apparently will fill orders on SIM as near as would be done on live as possible (obviously the trades won't go through, but trading size I will be it shouldn't make much differerence to overall market flow).

    #10     Nov 18, 2011