Barjon's Money Machine

[scose-no-doubt]

I've been running this over three years and the only trouble I got into was in the early days when there was a major one-way realignment (the HC or Spanish type event )

What happened? Sep-08 ish?

 

[ChocolateDigestive]

And cheapest of course.

I think 'first' encapsulates this but it's worth pointing out that being willing to accept a smaller spread (which really requires lower costs) is what gets you in first.

Hence, large obvious arb opportunities being as rare as a Howard Cohodas losing trade!

no not the cheapest this is not mission critical, not saying you don't need to be cheap, clearly you need to be cheap, volume cheap. The institutions self clear their HFT but volume HFT firms can clear 1000 shares for 5c or less. I pay 20c for my manual trades.

first does not encapsulate this sorry. I am referring to 1st in the queue, the right ECN queue. Most HFT algos operate in US stocks, having lower costs does not get you in first, this is just plain wrong.

without being disrespectful I would suggest you read the speed traders book then perhaps we could have a sensible discussion on the matter.

what you paying on the ES, $3 a round turn lolololololol

 

[scose-no-doubt]

Choccy,

I would have though that if anything, HFT could be beneficial to people trading this type of spread. I'd guess there are more algos that are operating and adding to trends that would throw this further out of kilter than those looking to earn from the close.

 

[DionysusToast]

Vendors should be banned and so should idiots. Be a bit quiet then....

As usual, a 'pot of gold' thread on T2W will turn into a "burn realists at the stake" event...

Stat Arb traders of course will not take trades blindly. If you pair traded a couple of stocks for instance, you would not trade them if one stock had an earnings announcement the next day.

Knowing WHEN to take the trades is key.

With SB and holding overnight positions, you have an interesting dilemma. You have nothing to get you out of a trade that goes wrong when you are in bed.

You have Jon holding positions overnight. He can't have a stop loss on an individual trade. There is no upper or lower boundary for any side of his position as long as the two move in unison. His bucket shop doesn't understand the relationship and cannot exit both sides when they go out of whack. If there is a major shift in GBPUSD when Jon is asleep, he could be waking up to a very sorry looking account, similarly if there is an overnight UK event.

In effect, you have a trade with no risk management. As I mentioned earlier, Howard Cohodas, Spanish89.

 

[ChocolateDigestive]

Choccy,

I would have though that if anything, HFT could be beneficial to people trading this type of spread. I'd guess there are more algos that are operating and adding to trends that would throw this further out of kilter than those looking to earn from the close.

no HFT algos will not be in this space, for reasons already stated. There may be a few but there preference is high sharpe ratio and volume round turns intraday. Remember being able to play a good edge many many times per day is much preferable to playing an ok edge a couple of times a week.

 

[DionysusToast]

no not the cheapest this is not mission critical, not saying you don't need to be cheap, clearly you need to be cheap, volume cheap. The institutions self clear their HFT but volume HFT firms can clear 1000 shares for 5c or less. I pay 20c for my manual trades.

first does not encapsulate this sorry. I am referring to 1st in the queue, the right ECN queue. Most HFT algos operate in US stocks, having lower costs does not get you in first, this is just plain wrong.

without being disrespectful I would suggest you read the speed traders book then perhaps we could have a sensible discussion on the matter.

what you paying on the ES, $3 a round turn lolololololol

Sigh....

So in your world, spreads never narrow because people are willing to trade a smaller edge to jump ahead of the competition?

Similarly, overtraded edges never disappear for exactly the same reason?

As you made a suggestion, let me give you one: If I were you, I'd try to not use sarcasm/insulting behaviour in an interesting debate. It doesn't add to the debate and frankly, it makes you look a c0ck when your flawed reasoning is pointed out by someone who is showing both more class and more patience.

 

[scose-no-doubt]

I think you're really oversimplifying the exposure aspect of this spread DT but I do get where you're coming from.

 

[barjon]

In effect, you have a trade with no risk management. As I mentioned earlier, Howard Cohodas, Spanish89.

The risk management is in the pair, toastie, as choc pointed out earlier and I think it's almost inconceivable (although possible, I suppose) that a major realignment can happen overnight. Even that disaster down spike day (hour) when DOW dropped off the cliff only to recover within minutes saw FTSE shadow the move.

 

[ChocolateDigestive]

Vendors should be banned and so should idiots. Be a bit quiet then....

As usual, a 'pot of gold' thread on T2W will turn into a "burn realists at the stake" event...

Stat Arb traders of course will not take trades blindly. If you pair traded a couple of stocks for instance, you would not trade them if one stock had an earnings announcement the next day.

Knowing WHEN to take the trades is key.

With SB and holding overnight positions, you have an interesting dilemma. You have nothing to get you out of a trade that goes wrong when you are in bed.

You have Jon holding positions overnight. He can't have a stop loss on an individual trade. There is no upper or lower boundary for any side of his position as long as the two move in unison. His bucket shop doesn't understand the relationship and cannot exit both sides when they go out of whack. If there is a major shift in GBPUSD when Jon is asleep, he could be waking up to a very sorry looking account, similarly if there is an overnight UK event.

In effect, you have a trade with no risk management. As I mentioned earlier, Howard Cohodas, Spanish89.

what utter utter bo77ox you talk m8. and thanks got you to bite and won my little bet.

of course stat arb traders will not take trades blindly. nobody is saying they do.

'If you pair traded a couple of stocks for instance, you would not trade them if one stock had an earnings announcement the next day' - gross generalization, of course you dont actually pair trade stocks so you wouldnt know.Here is a pair trade (see attached) that I actually took earlier in the week, it was intraday would have happily took it if there was an earning announcement the next day.

As usual, a 'pot of gold' thread on T2W will turn into a "burn realists at the stake" event...' - more like stop people who think they know what they are talking about from derailing a thread and sending people down blind alleys.

'Knowing WHEN to take the trades is key' - fook me I will write this gem on my wall.

maybe you have a hidden secret agenda to put people off spread trading and back onto your products.

 

[counter_violent]

or the FTSE/DOW pair via SB


A bit ago CV suggested I put up to shut up (an argument progressing on some thread I can’t remember), so here’s the bare bones for your delectation and delight.

Not a trace of vendoring in sight – which should please pee bee and scose

Not based on any TA – which should please toastie

An itsy bit of randomness – which should please hare

Some mean reversion – which should please rob

Live trades on ftse futures thread (you have to hunt**) – which should please flashy and joe

No statements though – which won’t please joe at all

And no lulz – which won’t please a whole bunch of people

** latest here http://www.trade2win.com/boards/uk-indices/120172-anyone-scalping-ftse-futures-1298.html#post1917008 which is underwater at the moment (no cherry picking )

ok, have at it gang

jon

5 hrs old thread.

Better add flame fest to your list.

 

[ChocolateDigestive]

The risk management is in the pair, toastie, as choc pointed out earlier and I think it's almost inconceivable (although possible, I suppose) that a major realignment can happen overnight. Even that disaster down spike day (hour) when DOW dropped off the cliff only to recover within minutes saw FTSE shadow the move.

great thread its got potential for thread of the year! Toastie doesn't seem to understand why spreads are deemed safer! the mighty CV told him, the exchanges require way less margins, pah ha ha ha ha ha.

 

[scose-no-doubt]

Anyone else smell smoke?

 

[barjon]

aaah, calm down chaps. I gave the thread it's title with tongue in cheek as toastie says and all I'm doing is opening up the strategy and giving some numbers for you to make of what you will.

 

[DionysusToast]

The risk management is in the pair, toastie, as choc pointed out earlier and I think it's almost inconceivable (although possible, I suppose) that a major realignment can happen overnight. Even that disaster down spike day (hour) when DOW dropped off the cliff only to recover within minutes saw FTSE shadow the move.

There is no risk management because there is nothing to close you out if things go awry.

If your SB broker has an API, I'd be looking sharpish out for a programmer that can put a safety net in place for you.

There are 2 risks, currency risk & correlation risk.

 

[DionysusToast]

what utter utter bo77ox you talk m8. and thanks got you to bite and won my little bet.

of course stat arb traders will not take trades blindly. nobody is saying they do.

'If you pair traded a couple of stocks for instance, you would not trade them if one stock had an earnings announcement the next day' - gross generalization, of course you dont actually pair trade stocks so you wouldnt know.Here is a pair trade (see attached) that I actually took earlier in the week, it was intraday would have happily took it if there was an earning announcement the next day.

As usual, a 'pot of gold' thread on T2W will turn into a "burn realists at the stake" event...' - more like stop people who think they know what they are talking about from derailing a thread and sending people down blind alleys.

'Knowing WHEN to take the trades is key' - fook me I will write this gem on my wall.

maybe you have a hidden secret agenda to put people off spread trading and back onto your products.

Is there some reason you can't discuss an issue like a mature adult?

You only discovered spread trading a couple of weeks ago - you mentioned the breakthrough on this very forum.

Your obvious expertise gained from all these days of trading do not mean the rest of us can't express opinions without you trying to denigrate them with your various ludicrous accusations...

 

[DionysusToast]

July 2nd....

the thread has died so I will attempt to rekindle it.

I have been reading a lot about pair trading and spread trading recently - they are basically the same thing. I love the way you can take out the market (beta) component. Why would you want to do this? Well there are several reasons but one of them is you may have a view on something other than the price. Often professional traders will trade these as they have a view on something created by specialist knowledge from somewhere. Other times the spreads show some price action that is easier to trade.

Lets take a very simple example of a heating oil calender spread (Aug 2012 - Dec 2012). I just knocked up a quick chart in Esignal using the custom spread function. This is a synthetic spread (i.e. I made it up) not an exchange traded spread. Hence to trade this I would have trade each position manually (leg in and out).

Now take a look at the chart. You can see that once or twice a day the spread comes away from the average by some considerable distance and then mean reverts nicely. At 12.00 today London time the spread got really out of whack.

As you can see this is not like trading an individual stock, FX, future, bond where you can be taken out by any manner of 'noise'.

The amount of future contracts you can spread is almost infinite. I would say this is nothing short of awesome.

Also you would think you need masses of money to trade these spreads like the pros. Not so, you can get Esignal for $134 p/m plus exchange fees that you are looking at, use this to chart your spreads. You dont need any expensive spreading execution software you can just execute through Ninja, brokers like AMP/Ninja have very small account minimums and margins for a lot of futures contracts are c.$500.

Quite the expert in spread trading, arent we

 

[barjon]

There is no risk management because there is nothing to close you out if things go awry.
.

Well I guess that's right, but the risk of disaster is so minimal as to be of no account ( in my view). For the rest, risk has to be manually controlled which is not ideal but workable.

 

[ChocolateDigestive]

July 2nd....




Quite the expert in spread trading, arent we

Toast. Calm down I was just baiting you and it seems to have worked a treat. I said on the post you quoted (are you stalking me) that I had been reading a lot about spreads recently, no biggie I wouldn't call myself a newbie to spreads nor an expert. That post I made was intended to open discussion on spreads.

Here is the thing. It is difficult to have an adult conversation with someone who comes out with thing like:

Why are spreads safer?
Don't trade stock pairs if there is an announcement the next day.
Blatant nonsense on HFT about paying spreads etc.

Its just a wind up when they are clearly numpty statements coupled with you vendoring you wares, hence agenda to derail thread back 'on message'. Then throw in you calling me an idiot when some of the stuff you said is clearly numpty ish.

 

[DionysusToast]

Well I guess that's right, but the risk of disaster is so minimal as to be of no account ( in my view). For the rest, risk has to be manually controlled which is not ideal but workable.

That's what Howard said, sir...

 

[counter_violent]

Jon, do us a favour....stick in some cato stops n limits on the overnights will ya.
This threads already givin me a headache