Scalping - Arcade vs Broker

[maxima]

Thanks to Grant I started to think out of the box

I need to aquire basic knowledge first though. So - scalping!

1. Cost of trade

a) IG - if you buy 1 CFD contract you effectively paid them £20 in commision as spread is 2pt on the FTSE contract
b) IB - there is spread on underlying market + 3.40 commision. Today it closed at 5973-5974.5. Means that one trade would cost 15+3.40 - a bit lesser than through IG.
c) Arcade - only fee I have figured out so far is the lease of seat which is about 1k per month. What do you spend per trade?

2. Speed of order execution/fill

a) IG - fast (because they dont fill real market order - just some software operations within they own servers. most of delay - web based execution because webbrowsers are slow by design. I am going to look at their L2 platform though. Has to be very fast)
b) IB - how fast it work? Do they give you a real DMA?
c) Arcade - supposed to be fastest way to fill orders. Is that right?

Main questions are:

- Is DMA suppose to give you access to an exchange order book directly so you can place and order actually on the exchange and sometime buy at bid price? Do brokers provide you a true DMA?

- How can one compare a broker with an arcade in terms of speed of order filling?

- Can I have remote access to a good arcade which located next to LIFFE (which will amount to quite similar performance if I sat locally in Surrey arcade for example)?

 

[Directional]

typical market spread in most futures instruments, including FTSE is only 1 tick, of half a point in FTSE. This is obviously subject to the "market", but thats nothing to do with the broker.

An arcade will give speed advantages, and much lower costs - but only worth it if you're doing volume; ie a few thousand+ contracts a month.

I'd suggest you perfect your scalping with a DA broker such as IB, starting with a simulator so you dont risk any money, and if you're profitable take it from there.

 

[grantx]

Max,

This is probably one of the finest compliments I received (a good start for the morning).Thanks for that.

I agree with Arbitrageur.

I don't know what you're financial position is but assuming it's less than £25K, I would suggest leave trading with hard cash and use a simulator. This will help you develop your strategy.

Further, by watching price action on the DOM and order flow for example you will begin to anticipate price action - to a certain degree (not 100% but what is). It takes time and you probably can’t see anything but in due course, you start to notice nuances.

I would suggest give yourself a year (minimum) to learn. At the end, hopefully you will have increased you funds and can think about being a self-financed trader in one of the arcades. However, it is also possible to avoid all the costs - desk fees, price-feed costs, etc by being a "remote" trader, ie trading through the arcade but working from home, for example. All you pay is clearing fees - considerably lower than SB's or IB.

I currently pay c £60 per month for a live feed, Eurex prices (they cover all exchanges), charting and simulator from VisualCharts:

fromhttp://www.visualchart.com/enxx/products/institutional/institutional.asp?seleccion=5

I don’t think there is anything cheaper.

It may be an idea to read up on fundamentals/theoretical (this is not a popular view) as well as “How to...” books.

Arbitrageur, what do think is the minimum funds for a self-financed trader?

Good Trading,

Grant.

 

[Directional]

Arbitrageur, what do think is the minimum funds for a self-financed trader?

I think any decent firm would expect you to begin working with around £20k deposit. I think some will accept as low as £5k but this wont last long when you consider desk fee's, and the fact that your return on margin would need to be quite high in order to make profits over costs.

 

[maxima]

Thanks again for your efforts to help!

Capital is factor of success. To play with I can fork 5k any day. To trade in learning mode I can raise 25k. If it will be real success and I can get at least 500 every day (to level with my day job) I can raise more than that.

But can you please give me rough idea what kind of costs are involved in maintaining presense in arcade and more detailed view on costs of operations (open/close position).

Also I really interested in remote way to work with arcade (VPN connection perhaps?).

And yes I was thinking of going through some simulator for a month. Does IB provide simulator with their s/w?

 

[maxima]

I currently pay c £60 per month for a live feed, Eurex prices (they cover all exchanges), charting and simulator from VisualCharts:

fromhttp://www.visualchart.com/enxx/products/institutional/institutional.asp?seleccion=5

It may be an idea to read up on fundamentals/theoretical (this is not a popular view) as well as “How to...” books.

Thanks a lot! will have a look first thing today evening.

Can you please give me a breakdown of remote arcade expense? That what I really need - as I hate public transport and daily commuting into the City

 

[gooseman]

in an arcade you pay between 1k and 2k per month to sit and trade. that covers your computer, exchange fees and clearing fees.

depending on your deal you pay between 50p and £1 per lot. Obviously if you're big size you get a rebate.

 

[maxima]

in an arcade you pay between 1k and 2k per month to sit and trade. that covers your computer, exchange fees and clearing fees.

depending on your deal you pay between 50p and £1 per lot..

So if I do 200 winning trades a month for 4pt each on FTSE futures then my balance sheet will look like:

in 200 x 4 x £10 = 8000
out £1000 for the seat + £1 x 200 deal fee = 1200
total: £6800.

Well it is less than I need to replace my day job but still very positive outcome.

I think perhaps two options are more likely to happen - either I wont be able to accomodate trade by order book at all or it will be 2000 trades for 2pt instead.

 

[gooseman]

you're forgetting the possibility of making a loss....oh yeah and don't forget the tax man...

 

[maxima]

you're forgetting the possibility of making a loss....oh yeah and don't forget the tax man...

Well, I am pretty much aware that loss is much more than a possibility it is reality.

I just didnt want to litter the calcs (and my positive Friday moods) with losing trades. Lets say 200 - is number of positive trades minus negative trades.

Taxman - I remember this word even when I sleep. I know they are going to get me! Aaaa!

So I am comparing gross income to gross income.

 

[gooseman]

horrible horrible taxman.....my average before costs wasaround 50 ticks profit per day when I was up and running. that was a full time local.

 

[maxima]

this suggests that I may realistically expect to do 200 ticks a month and not 800....

 

[grantx]

Max,

I wouldn't make earnings projections based optimistic expectations - there is no credible basis. Starting from scratch, I reckon 99% of people lose (or make very little) money within a year. That's why I believe it will take a year to prepare - not a month.

If you trade via an arcade, you'll be paying the monthly costs and not making money - perhaps one should refer to the "attrition" rate for funds.

It is vital to hold on to your capital as long as possible. While you are not making money during preparation, at least you are not losing it.

I think some arcades give 1 month trading - maybe consider this as a first step for the basics, then go and do your own preparation by building on this (via the simulator).

Grant.

 

[maxima]

I completely understand what are you trying to say... Of course there is no guarantee in this business.

Surely it wont take 1 month to get fit (if ever). But I will try brokerage way first as I have some idea how I can fit my previous experience into it (slower than arcade but there is no obligations - no trade - no cost).

My optimism is very remote in reality. But there is a small base for it. I had 2pt to get through before my trade become neutral (in SB) and I could manage to find the way to trade. Having 1pt plus commission seems makes my chances bigger.

I have not much doubt I can do it. Of course I can do it. The problem is - would I be able to build a good throttle to keep me interested and motivated and do it consistently. As it is very tedious job to sit and wait for good market condition.

It has to bring me enough money to drop my job which brings me a lot.

And that is very difficult indeed... But I have some chance and I am going to exploit to the full

 

[fifty2aces]

My advice would be to go and sign up for a demo account at mirusfutures - they give you free realtime data (including L2), which can be used in Ninjatrader (which is again free for simulation). That'll cost you nothing, and will give you a better idea of how well your trading ideas will work. Once you're confident you can make money, get a real money account, either with Mirus, IB, or whoever, and start trading 1 lot at a time - as you get comfortable, you can add more.

Trading in an arcade isn't really going to be a good idea until you're doing enough size to justify the desk costs.

 

[maxima]

My advice would be to go and sign up for a demo account at mirusfutures - they give you free realtime data (including L2), which can be used in Ninjatrader (which is again free for simulation). That'll cost you nothing, and will give you a better idea of how well your trading ideas will work. Once you're confident you can make money, get a real money account, either with Mirus, IB, or whoever, and start trading 1 lot at a time - as you get comfortable, you can add more.

Trading in an arcade isn't really going to be a good idea until you're doing enough size to justify the desk costs.

Thank you. that is about a plan. I havent seen Mirus until yesterday though. But will give it a thought.

L2 and trading by book on real contracts is a bit different than my SB experience. I need to get used to it.

 

[maxima]

Latest researches

I tested IB, OEC and Mirus (Ninja) platforms and I found that naturally I tend to get 0.5-1.5pt profit. For FTSE 100 Contract that mean £5-15 of profit. However commission makes it very unattractive.

IB - 3.4, OEC - 3.20, Miurs - 2.90 (still waiting for firm confirmation)...

How do people scalp through brokers with such costs? Is it possible to get RT commission under £2 for 2000 trades a month?

 

[grantx]

Max,

On another post, you indicated 20 trades per day; now it's 100 per day. How much trading capital do you intend to use? Once known, we can advise better.

Grant.

 

[maxima]

Max,

On another post, you indicated 20 trades per day; now it's 100 per day. How much trading capital do you intend to use? Once known, we can advise better.

Grant.

20 - that figure derived from my SB experience. But after I tried IB, OEC and Mirus I understood that on real DMA platforms it is easier to do more trades more often with smaller profit.

But still - I am confused - how size of capital is connected to frequency of trades? For first (training and settling) months I am not going to have opened positiong on FTSE more than size 1. So I need just 2000 to 4000 for margin.

Or do I misunderstand margin concept as a whole?

If I will be successful in first 4-6 month I am going to move up to 5 contracts per trade. Problem is not in the capital size but that I am not sure I can handle risk psychologically more than £50 per point....

P.S. In short words - my ideas evolve very quick along with process of aquiring new information (including your help )

 

[grantx]

Max,

I'm sorry, mate, my mistake (I've been under a lot of pressure lately). I was confusing total trades for the day with actual trade sizes. Your thinking is absolutely correct - as long as you have the minimum margin at all times you can 1contract 1000 times a day.

Re "£50 per point", there may be confusion here on your part. The point (or tick) value of all futures contracts is fixed - it is not determined by the trader/investor as in spread betting. Eg, FTSE = £10 per point, DAX Eu25, bund Eu10. But note some contracts have a minimum of 1/2 point (or tick) - FTSE (?), DAX, bobl and schatz.

We'll get there in the end.

Grant.