Edge/Spread

[kimo'sabby]

wrong , i dont c where is the edge if u dont pay spread , u need something extra ....

What is the difference between a 1 pip exit and a 100 pip exit, what is the all important factor?

 

[counter_violent]

but sometimes u will exit using stop orders = possible negative slippage ...

tar..seriously. Which part of only uses Limit orders to exit did you not understand.

On this strat I never use any other type of order to exit.

 

[William Waller]

Can you just give me a hand getting off this big black leather sofa.....i've gone all dizzy.

Same time next week?:|(thanks for the free induction)

I think I'm busy .

One last piece of mystical mumbo-jumbo - don't give up the day job. You have a great deal to learn about trading. My advice would be to keep purchasing systems - eventually you're bound to find one that works.

 

[counter_violent]

Slippage is part and parcel, but how does that effect the spread/no spread arguement?

Well lets say that your strat employed only looks for a fixed nett amount of pips. If this is the case, spread cost is completely irrelevant.

 

[kimo'sabby]

I think I'm busy .

One last piece of mystical mumbo-jumbo - don't give up the day job. You have a great deal to learn about trading. My advice would be to keep purchasing systems - eventually you're bound to find one that works.

Do you own cats?

 

[tar]

What is the difference between a 1 pip exit and a 100 pip exit, what is the all important factor?

no spread = it is like betting on a roulette table without a zero , zero spread and comm dont give u edge alone ...

 

[William Waller]

Do you own cats?

No, but I do know how to trade. I learnt by asking questions of those who knew more than me. I listened even when the answer was not the one I wished to hear.

 

[tar]

tar..seriously. Which part of only uses Limit orders to exit did you not understand.

On this strat I never use any other type of order to exit.

I understand what u said , but if the market goes against you , i cant c how u always can exit without using stop orders , unless ofcourse u wait the market to retrace for few points , and in this case in the long run it costs you more than the spread and any possible slippage ....

 

[kimo'sabby]

Well lets say that your strat employed only looks for a fixed nett amount of pips. If this is the case, spread cost is completely irrelevant.

I wasn't going down that line of arguement. Whichever way you want to take the arguement ie. slippage, the same invariables apply to both sides, spread/no spread, so the no spread arguement wins.

 

[counter_violent]

I understand what u said , but if the market goes against you , i cant c how u always can exit without using stop orders , unless ofcourse u wait the market to retrace for few points , and in this case in the long run it costs you more than the spread and any possible slippage ....

Correct...the strat does not have stops...it's all about managing trades.

 

[meanreversion]

All things considered, is having no spread to pay probably the biggest tangible edge that a trader could want?

Not wishing to sound like an old fart, but do you have any idea how tight spreads are these days? 1 pip in EUR/USD, 2 in GBP/USD? This is almost no spread anyway. 10-15 years ago it would have been 5-7 and 8-11 pips respectively, with nowhere near the same choice of broker.

Now, if you could always guarantee that your stops were done precisely at the rate you specified, with no slippage ever, then THAT would be an edge. In fact, that would be free money.

 

[pboyles]

Now, if you could always guarantee that your stops were done precisely at the rate you specified, with no slippage ever, then THAT would be an edge. In fact, that would be free money.

No, that would be a liquid futures contract like the Bund, ES, Eurostoxx (providing you're not trading 1000 contracts at 2am of course). Something like the e mini Dow on the other hand is a different story as the volume is way less.

 

[kimo'sabby]

Not wishing to sound like an old fart, but do you have any idea how tight spreads are these days? 1 pip in EUR/USD, 2 in GBP/USD? This is almost no spread anyway. 10-15 years ago it would have been 5-7 and 8-11 pips respectively, with nowhere near the same choice of broker.

Now, if you could always guarantee that your stops were done precisely at the rate you specified, with no slippage ever, then THAT would be an edge. In fact, that would be free money.

If i pay no spread and you pay a 1 pip spread, then i can play a game that is beyond your reach.

I have an edge that you do not, it does not necassarily make me a better trader than you, but it gives me a tangible edge.

So no spread is an edge, a very real and proper edge.

 

[kimo'sabby]

No, but I do know how to trade. I learnt by asking questions of those who knew more than me. I listened even when the answer was not the one I wished to hear.

Ok then, how do brokers calculate their margin rates?

 

[kimo'sabby]

no spread = it is like betting on a roulette table without a zero , zero spread and comm dont give u edge alone ...

So what gives YOU an edge? I guarantee you that you can not explain it in a coherent manner.

Whichever way you want to look at the 'no spread' arguement, it is quite simply an edge.

 

[kimo'sabby]

Ok then, how do brokers calculate their margin rates?

Is the resident psychologist not answering?

 

[meanreversion]

Well, a couple of things.

1. The original question was "is no spread the greatest tangible edge a trader could have". Clearly if you see choice prices (bid=ask) all the time, and I pay a pip, then you have an advantage over me when it comes to dealing. But is this the "greatest edge" you could have? Probably not.

2. If your stops are always executed at the rate, with no slippage, ever, then you can easily synthesise a long option position.. e.g. GBP/USD spot is 1.52, stop sell at 1.50 in GBP 1mio, if done then buy stop at 1.50, if done, sell stop at 1.50 ad infinitum. This way if spot is below 1.50 in (e.g.) a year, you will be short spot from 1.50, and if it is above, you will be flat. This is like being long a GBP put with a strike of 1.50, for no charge. So at the outset, simply sell a 1.50 GBP put in the market and it's free money.

In other words, this situation cannot exist. There must be slippage on stops on occasion.

 

[kimo'sabby]

Well, a couple of things.

1. The original question was "is no spread the greatest tangible edge a trader could have". Clearly if you see choice prices (bid=ask) all the time, and I pay a pip, then you have an advantage over me when it comes to dealing. But is this the "greatest edge" you could have? Probably not.

2. If your stops are always executed at the rate, with no slippage, ever, then you can easily synthesise a long option position.. e.g. GBP/USD spot is 1.52, stop sell at 1.50 in GBP 1mio, if done then buy stop at 1.50, if done, sell stop at 1.50 ad infinitum. This way if spot is below 1.50 in (e.g.) a year, you will be short spot from 1.50, and if it is above, you will be flat. This is like being long a GBP put with a strike of 1.50, for no charge. So at the outset, simply sell a 1.50 GBP put in the market and it's free money.

In other words, this situation cannot exist. There must be slippage on stops on occasion.

It's a good post, but let me throw some overlooked phrases/words into the melting pot.

"Tangible"

"All things being equal"

 

[William Waller]

Ok then, how do brokers calculate their margin rates?

I'm afraid I don't understand the question. I can explain how margin and leverage work if you wish (or you can find out by visiting any broker website), although the rate is irrelevant as long as you employ proper MM.

 

[kimo'sabby]

I'm afraid I don't understand the question. I can explain how margin and leverage work if you wish (or you can find out by visiting any broker website), although the rate is irrelevant as long as you employ proper MM.

William (all past posts aside) my broker does not explain it's position on margin, it explains comms/financing, but not margin.

Why is this?