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The sharing/not sharing dilemma

  #30 (permalink)

North Carolina
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
Posts: 644 since Nov 2011

@AuthenticTrader I wasn't going to comment but this logic posted by Grady is nonsense. That logic doesn't make any sense because if I know where you will buy and your entry has an edge then why wouldn't I just buy everything in front of you? If you plan on trading with tight stops, do you think there is unlimited volume at these prices? The low tick had like 39 contracts executed only in the ES. The price above that had 1600 vs the closing price of 36,550. If you use market orders, the same sorts of issues apply but the issue is speed. Even if everyone buys after you, there is still a chance they will find the exit better and/or that they will just increase the volatility. Neither are beneficial. Also, think about if they had planned to sell to you but recognize they can get a better price. They might hold for better prices. This doesn't mean that I always think trading is competitive because there is a lot of uncertainty. Generally, we think of more competitive games as relying less on luck and more skill -- being more deterministic.

What would really happen if 2,000 are trading exact same method and buying at same time? Just thinking about it off the cuff, all orders will arrive at random. So, if those 2,000 traders are trading 5 lots, that's 10,000 contracts: absolutely enough to cause issues for some methods. Now, if you want to say that you don't care to share because you already know the competition is better and/or that what you do is so difficult then possibly or to demonstrate your abilities-- that can make sense.

Traders do share actual edges for free though and yes sell them. In order to understand why, remember the future is unknown. Every serious trader knows trading is a risk venture. So, it makes a lot of sense to pair something risky like trading with a low risk income stream like selling stuff. There are also real costs to developing edges and trading. If you're not trading a big enough account then selling stuff helps offset those costs. For example, let's imagine 2 traders develop a good strategy. It takes 6 months. We'll say the sunk cost on that is $50,000. For a firm, the cost might not be significant but for an individual trader -- it means you have to make 50k to break even. So, that's going to be much more difficult to do for an independent trader.

The other factor is that people who do this: it is their work. So, they would do it regardless. Many serious traders haven't made it and don't have capital to trade everything they make. Most traders do share with other serious traders for the collaboration, networking etc. benefits and sharing among small groups of traders doesn't have a lot of risk. Academics also publish edges for other reasons.

Now, there is some truth that there isn't anything new under the sun meaning that most edges are being traded by hedge funds already. However, they aren't being traded by everybody. That's the difference. To be honest, a lot of discretionary edges won't be traded by most funds anyway because the uncertainties and risks are too significant. As a general rule, better traders are more likely to share because they are more aware that the competition is already ahead of them. But, they are more likely to share among other traders in small circles. Specificity is of course a very relevant factor also as to the cost of sharing and the the number of traders you are sharing with.

Last edited by tpredictor; April 20th, 2018 at 09:21 PM.
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