Dispatches from the Front

This is a discussion on Dispatches from the Front within the General Trading Chat forums, part of the T2W Archive category; The idea of of tape reading is very similar to a pit trader at the CBOT or Merc trading off ...

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Old Sep 26, 2006, 5:12pm   #1
 
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Dispatches from the Front

The idea of of tape reading is very similar to a pit trader at the CBOT or Merc trading off of flow. In other words, the best floor traders made their money front running large orders, getting good flow from brokers, and reading the flow in the pit. Once that flow went to the screen and became fragmented, the bond floors became ghost towns. The front month Euro Dollar futures are so empty now you could sell rugs down there.

The edge was in having single listed markets. Where all the paper and flow came to you. You know what everyone was doing and when they were doing it. This applies to options as well. The equity option floors are a ghost town.

The only viable pit left is the SPX pit at the CBOE. Know why? Because all the paper still goes to the floor. They are the only exchange that trades that product.

Once you start splitting up and fragmenting order flow, the game of trading off of it is over. That's the bottom line.

With the ECN's getting more and more of the volume for listed stocks and the new trade through rules going into effect in October, the market is going to become very fragmented. What does this mean?

It means now the buyers and sellers are going to be harder and harder to find. They might be bidding for stock at the NYSE and offering it out on the ECN's. Now instead of watching one tape for a stock you will have to follow all the tapes. This will make trading a lot of stocks near impossible. The writing is on the wall.

There is a reason why most of the equity only shops have folded. It's not because of the penny spreads or the low volatility. In fact, we actually have a great trading market now. They folded because the most consistent day traders were tape readers and most of them are leaving the equity shops. That leaves you with all the bottom and top pickers that inevitably blow out within months. Why do you think Don Bright is pushing what's left of his daytraders into pair trading?

No, I do not daytrade anymore. I left the game when they took away bullets. That was awhile ago. I also left because you can't build a long term career daytrading. At least not in the money management business.

Maverick 74
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Old Sep 26, 2006, 7:53pm   #2
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Db,
Maverick 74 (although he does have other monikers) is, IMO, someone worth listening to. I stumbled across him while slogging through ET trying to find something intelligible about T&S (T2W has very little on T&S). He gives an excellent description of what the tape is and how he used it in the past when he was daytrading. I am sure you already know this but others may not. He is sharp and humble.
Although we may have differences of opinion about some things, I share your sentiment with regards to this man.
ljy
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Old Sep 27, 2006, 12:19am   #3
 
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all markets going electronic does not sound like a bad thing
you are absolutely right the pit knew the flow of money and which direction now they are almost on an even ground except they have a lot more money
but i disagree that buyers will be harder and harder to find, maybe for the market makers of old or the specialists from the NYSE but where ever there is the potential to make 'Quick Money' you will get crowds and where there is crowds there will always be greed and fear
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Old Sep 28, 2006, 7:39pm   #4
 
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dbphoenix started this thread [ ]'s approach profiled here can be very effective in real time, but definitely takes experience to operate correctly. Any use of oscillators and crossovers to trade with always involves various degrees of pattern recognition.

Experience in real time over the course of time is how we define the term "feel". I have absolutely no doubt [ ] can "see" things on his chart others cannot as of yet due solely to experience at work.

There is no way to export experience from one trader to another via any communicative means. [ ] has laid out a simple approach which works for him... all of the little nuances and individual twists can only be learned by each person thru weeks, months and years of live observation.

Instant success via A-B-C follow some rules does not happen in our profession. It is a lot longer road to success than that, with an equally high level of reward once you get there.

Be patient, take your time, watch the squiggly lines do their thing across the charts for a few months & years. It all comes gradually clear over time!

Best Trading Wishes
Austin
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Old Sep 29, 2006, 7:06pm   #5
 
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dbphoenix started this thread Do you find it best simply to go away and play golf when you're not in tune with what's going on?

No... a pilot needs X amount of hours in the air... we need screentime.

You won't find a market's rhythm or a system's signature on the golf course.

Realtime screentime separates the back-testers from the traders.

You don't need to trade but you do need to sit there and go through the process of watching trades form, especially if it is a new timeframe for you.

T28
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Old Oct 9, 2006, 12:41pm   #6
 
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dbphoenix started this thread Although trading for yourself and working in corporate america has it's distinct differences, they mimic each other in that they both carry a certain level of stress and frustrations. Many folks have a surreal impression that (day)trading does not necessitate long hours, hard work, stress, or personal sacrifices.

I have spent the better half of my professional life despising coming to work each morning. This obviously affected my personal life and the level of happiness that I would achieve. My sole goal in life was to obtain the level of capitalization that would allow me to live freely without being a slave to the rat race. Unfortunately, this path is a lengthy and treacherous one without any guarantee of success. Years of my life rolled by while I worked away at trying to increase my funds and lot sizes. Trying to advance in your career and building a trading plan simultaneously was a burden on myself and my family. I continuously told myself that in X years, this would be all behind me. That may be true in a perfect world, but I soon realized that my goal may have been reached in 2 years, 5 years, 10 years, or possibly never. All I focused on was the future and how I would carve my path to financial freedom. All the while, I missed out on many opportunities to enjoy life in general.

I will tell you that this is no different whether you are a lawyer, CPA, or a trader. The goal is still there and I am by no means saying that these goals are not valid. What I am saying is that there must be a balance between enjoying your personal life and generating your income.

Fortunately, I had a very abrupt wake up call when I was almost involved in what would have been a fatal motorcycle accident a year ago during labor day weekend. Ever since then, my whole perspective towards work, the daily routines, and life overall had a 180 degree change. I continue to trade because I love it and I find it incredibly intriguing. However, I no longer force such high expectations upon myself that would cause undue stress as a result. If I have a good month, great. A bad month...oh well.

In regards to your complaints about the daily routine, it is entirely up to you to make the changes in your life that will allow you to find happiness. It is up to you to find a positive trait out of every negative situation. If you miss interaction with other people, make it a point to meet folks after the day is over. Take the time to reach out to old friends.

Before you decide on changing professions, remember that there is no one single job that is perfect. The reason that people love their jobs is because they choose to find the positive aspects of what they do and disregard the negatives. Now if you cannot find anything positive about what you do or what you would like to do, then it becomes a problem. In this case, a career change is in order. However, for the most part, I believe that this is only necessary in extreme circumstances.

Whether you decide to continue trading or pursue a career in selling pet rocks, remind yourself that time is the only resource that cannot be replaced. I almost lost my life a year ago. Take it from my experience.

Your life is what you make of it.

Optionspoet
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Old Oct 10, 2006, 1:55pm   #7
 
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dbphoenix started this thread The Green Bathrobe Story

By the third day of their honeymoon in Las Vegas, the newleyweds had lost their $1,000 gambling allowance. That night in bed, the groom noticed a glowing object on the dresser. Upon closer inspection, he realized it was a $5.00 chip they had saved as a souvenir. Strangely, the number 17 was flashing on the chip's face. Taking this as an omen, he donned his green bathrobe and rushed down to the roulette tables, where he placed the $5 chip on the square marked 17. Sure enough, the ball hit 17 and the 35-1 bet paid $175. He let his winnings ride, and once again the little ball landed on 17, paying $6,125. and so it went, until the lucky groom was about to wager $7.5 million.

Unfortunately the floor manager intervened, claiming that the casino didn't have the money to pay should 17 hit again. Undaunted, the groom taxied to a better-financed casino downtown. Once again he bet it all on 17 - and once again it hit, paying more than $262 million. Ecstatic, he let his millions ride - only to lose it all when the ball fell on 18. Broke and dejected, the groom walked the several miles back to his hotel.

"Where were you?", asked his bride as he entered their room.

"Playing roulette".

"How did you do?"

"Not bad. I lost five dollars".
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