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Can Day Trading be profitable for retail?

  #48 (permalink)

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jefforey View Post
Thankyou Iang for sharing the simulation result. I will definitely read your journal. I did some basic math with your results and the below is my observation:

1. You have 3000 trades in the week with profit of $18000.
2. With round trip commission of $4 it will cost $12000 for commission. If we assume $1 round trip (which is quite unrealistic) then it is $3000.
3. With 2 ticks of slippage per trade it comes to $25 * 3000= $75,000. if we assume 1 tick slippage per trade then it is $ 37,500.
4. That means $40,000 to $78,000 could be lost to slippage and commission alone.

With those numbers your strategy is not profitable.

How do i arrive at 2 ticks of slippage? It's my personal experience trading strategy live and also the number given by likes of kevin davey. This is what i saw. My entries were limit orders and exits market orders. My strategy converted the entry limit order to a market if it was not filled within 5 seconds of price crossing it. All exits were naturally market orders. My observation was a minimum of 2 tick slippage in every trade in es.
You have to win at least 3 ticks per trade to stay profitable overall in the retail world.


kevinkdog View Post
Ian's strat really relies on not having any slippage, and using limit order fills on both sides. Can it be done by a retail trader? As I've told Ian privately, I have my doubts. But I am very interested to see his live real money results.

I always include slippage of a few ticks, even on some strats where I am using limit orders. I find being a little conservative with slippage estimates is a good thing. But that is likely because of the type of strats I trade (non HF strats)...

I think a key issue here, especially when it comes to @iantg's recent discussions is what does retail mean?

Since Kevin is here lets start with him. Is Kevin a retail trader? As far as I know Kevin trades his own money and doesn't own or lease any exchange seats. So maybe he is retail. But he's also won 2 World Championship's of Trading, admits to trading between 50 and 100 systems at any one time, is a full time trader, and makes enough from his trading to live off. That on the other hand sounds pretty professional to me.

What about me? I'm also just a guy who works from home trading his own money, admittedly full time. Does that make me retail? What about if I say I lease a NYMEX seat for lower commissions. That in at least CME and the NFA's eye's makes me a professional. But then I also have colocated servers. My trading volumes are also high enough to justify having a seat.

What about Ian. 3000 trades in a week? HFT? Can that be retail?

Then there's institutional. And Hedge Funds. And CTA's. Where do they fit in. Is the guy hedging a refinery for BP considered institutional? Is the person running a small $5M Hedge Fund the same as PM with $1B under management?

For what it's worth I've always considered it to be whether your dependent upon trading for your income or not, but that obviously ignores many other possible definitions.


jefforey View Post
another point i wish to raise is that what Iang posted is not a typical HFT strategy. HFTs are based on front running themes where the success probability is approaching 100%. I think they rely on sure-shot success which is how they beat slippage costs.

Are you an expert on HFT or are is this just repeated rhetoric? Again before we can really start discussing it, we would need to define what we mean by HFT. Today off the shelf software can easily change orders dozens of times per second, does that make them HFT? To some people yes, to others, they would laugh at how slow that is.

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