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The sharing/not sharing dilemma

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Trading Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
Broker/Data: Stage 5 Trading
Favorite Futures: ZN
lax99's Avatar
Posts: 433 since Jun 2015
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tpredictor View Post
@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?

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. 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.

1) If you know where I'm going to buy, then you're the reason that I'm buying. I know that this probably seems flippant and argumentative so I'll expand on it. Scalpers are looking for the next guy who has a reason to buy 10k. Grady trades treasury futures. There are times in the ZN when it'll take 15k to clear a price, so knowing who is going to buy 10k can be very useful information.

If you know that I'm going to buy at 10, and you frontrun me by buying 4k at 11, then that's one more reason for me to buy. You help create the reason for me to get long. If you're buying 11, then chances are you're willing to buy 12 and maybe even 13. I'll buy somewhere in there as well, and then I'll look for signs that you're done buying. If you're long on average at 12, you might keep buying 13s into your offer at 14, 15, and 16. Then, as you scale out size at 14/15/16, I'll offer out there as well.

This is what he means by it being Manna from Heaven. At the core, scalpers look for momentum. If you're willing to contribute to that momentum, then you're a scalper's best friend.

2) Not to speak for Grady, but I believe that not caring about sharing because the competition is better isn't what he means by the statement. For scalpers of any size less than 500 in ZN (by a very rough guess), you really don't represent any competition whatsoever to any other market participant. If retail folks could trade 1500 in ZN, then that would be a different issue. The market would be completely changed. I think more to his point is what he mentioned; if all 20 traders hit a 50 lot to total 1000 contracts, then that motion might represent one domino in a chain of dominoes to fall. If there are enough people trading enough size that do exactly what he (or any other trader) does, then it's pretty damn easy for him to get paid on the trade. Or, at least, get a free look on the trade.

3) I realize that this is simply a random situation you're outlining so we can't really take it at face value. However, it takes more than 6 months to learn to trade. Even if a trader had 20 years of a track record, I would still expect it to take longer than 6 months and $50k to create a "good strategy" out of the blue.

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