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I want profit 1 tick per trade , Can I do that ?


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I want profit 1 tick per trade , Can I do that ?

  #11 (permalink)
ricks
Dayton, OH
 
Posts: 7 since Dec 2015
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This is a strategy that requires extremely low commissions for it to work, as in lower than what you will be able to get as a retail trader. I'd suggest you try other ideas out.

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  #12 (permalink)
 tpredictor 
North Carolina
 
Experience: Beginner
Platform: NinjaTrader, Tradestation
Trading: es
Posts: 644 since Nov 2011

The consensus wisdom is that this is a losing idea for the retail trader. Now keep in mind the consensus wisdom, aka common wisdom, also leads to mostly failed traders.

I've been thinking about similar strategies myself. With new commission free brokers like Tradeovate, there could be new opportunities for retail traders. I have seen in the ES (my primary market) that there are many more opportunities to capture 3 ticks of profit because most traders want that 4th (or 5th/6th etc) tick. If you can capture 3 ticks with 10 contracts in ES, that's $375. This type of strategy is probably most likely to work in a fashion where you enter on market and only capture one side of the spread. The catch is that you will probably have a low win ratio because you'll have to scratch or take many 1 tick losers.

Few potential catches: (1) your commission will make up a high percentage of your wins/losses-- this will make your win rate hurdle higher, (2) you will be incurring a higher "hidden risk" of trading so many contracts-- in event of a technical breakdown or something, if that combines with sharp market movement then it could lead to very large losses, (3) you will have to deal with uncertainty risk.. you might send your orders to exchange when you think you need too but faster traders might get filled before your target price, leading to you having to take a loss, (4) there will be a delay between when exchange reports you filled and you were filled, during the interim your trading platform may have issues reporting position correctly --not sure how that works.

My general feeling is that: 1 tick might not be worth the risk but that trying to capture a few ticks could be viable strategy. It is presumed that market makers, even those that are unofficial, capture the spread many hundreds of times by staying on the book at all times (and keeping top of book). They offset their risk by hedging using some other product such as a synthetic basket to replicate the market. Their edge is basically the volume that is traded multiplied by the spread. As a retail trader, you won't get top of book and you won't be able to do enough volume to make it work out and you won't be hedged. So, probably not..

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  #13 (permalink)
 OmegaXan2 
Los Angeles, CA
 
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100% doable as a point and click trader depending upon product.

Best product for this is likely to be treasuries. You're basically attempting a market maker risk overlay without the technology infrastructure though.

With good order flow skills, you could create a enough of a edge to translate it more markets.

I would also recommend spread trading, going the non-predictive route and more efficient use of margin to equity.

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  #14 (permalink)
 SpeculatorSeth   is a Vendor
 
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tpredictor View Post
The consensus wisdom is that this is a losing idea for the retail trader. Now keep in mind the consensus wisdom, aka common wisdom, also leads to mostly failed traders.

I've been thinking about similar strategies myself. With new commission free brokers like Tradeovate, there could be new opportunities for retail traders. I have seen in the ES (my primary market) that there are many more opportunities to capture 3 ticks of profit because most traders want that 4th (or 5th/6th etc) tick. If you can capture 3 ticks with 10 contracts in ES, that's $375. This type of strategy is probably most likely to work in a fashion where you enter on market and only capture one side of the spread. The catch is that you will probably have a low win ratio because you'll have to scratch or take many 1 tick losers.

Few potential catches: (1) your commission will make up a high percentage of your wins/losses-- this will make your win rate hurdle higher, (2) you will be incurring a higher "hidden risk" of trading so many contracts-- in event of a technical breakdown or something, if that combines with sharp market movement then it could lead to very large losses, (3) you will have to deal with uncertainty risk.. you might send your orders to exchange when you think you need too but faster traders might get filled before your target price, leading to you having to take a loss, (4) there will be a delay between when exchange reports you filled and you were filled, during the interim your trading platform may have issues reporting position correctly --not sure how that works.

My general feeling is that: 1 tick might not be worth the risk but that trying to capture a few ticks could be viable strategy. It is presumed that market makers, even those that are unofficial, capture the spread many hundreds of times by staying on the book at all times (and keeping top of book). They offset their risk by hedging using some other product such as a synthetic basket to replicate the market. Their edge is basically the volume that is traded multiplied by the spread. As a retail trader, you won't get top of book and you won't be able to do enough volume to make it work out and you won't be hedged. So, probably not..

Tradovate is definitely the right answer. You'll be saving yourself money on commissions within a week with the number of trades that kind of strategy needs.

You have to have a strategy with a reliable edge though. If you win you'll make a tick. If you lose you could lose two, or even up to four if you get really bad slippage. Which means you need a strategy that wins 66% of the time and probably more like 80%.

My suggestion is to focus on spots where you'll get filled. However, I think what you'll find is that somewhere along the way you'll find trades that are worth more like 2-4 ticks, and find those work out better for you.

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  #15 (permalink)
 
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 Jigsaw Trading  Jigsaw Trading is an official Site Sponsor
 
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It is of course, entirely possible. I know people that do it. So it's not a theoretical question as far as I am concerned.

But the keys to making it work are:

1 - How will you decide that it's a safe time to trade?
2 - How will you decide to enter on the bid vs the offer?
3 - How will you decide to scratch a trade once you are in (in other words - you get in on the bid, you didn't get filled on the offer yet and you decide to exit because conditions are no longer right).
4 - How will you decide to let the trade run for more than 1 tick?
5 - How will correlated markets factor in your strategy?
6 - Who is on the other side of your trades when you enter?
7 - What is the appropriate ratio of commission fees to tick value on the instruments you see as candidates for trading. For example -this is a no go on the DOW but attractive on the Ultras

If you can answer these questions, then you will be able to make it work.

If you have any questions about the products or services provided, please send me a Private Message or use the futures.io " Ask Me Anything" thread
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  #16 (permalink)
 
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 Mlok 
Prague
 
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simo88 View Post
Hello

i want profit 1 tick per trade , for example sell from price (3508 to 3507) or buy from ( 3510 to 3511) for get 1 tick only and relying on lots of contracts , so i want to know Will there be problems with the Spread (ASK , BID) be using this strategie ?

Hello, I red somewhere about a nice technique to do this. Please bear in mind that I never did that and I also wouldnt do that.

First you need an instrument that have big value per tick. If one tick profit is equal your commisions, you wont get anywhere. Then you also need some way to monitor your position in que.

So there is bid ask auction, you eneter a limit order at bid, or ask, depending on where you think market will go. Say you go ask. You watch your estimated position in que, as aggresive traders eat liquidity, your position will get closer and closer to be traded - and then, when you are only a couple of contract from being traded, you hit bid market order - and baam, your ask limit order will get traded right away and you are out with 1 tick profit. If you aret oo late, you hit market order at same price you just traded and you are out with just commisions loss.

I doubt you can do that with a huge position tho. Also remember that High Frequency Trading can do this really really fast, they are kings of small profits. But that doesnt mean it is inpossible to do, there might be some leftowers for a small fish. It just means that a lof of things can happen in a blink of the eye and trade going one direction can stop almost instantly. Also there are big orders that move market really fast.

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  #17 (permalink)
 
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 matthew28 
United Kingdom
 
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Mlok View Post
So there is bid ask auction, you eneter a limit order at bid, or ask, depending on where you think market will go. Say you go ask. You watch your estimated position in que, as aggresive traders eat liquidity, your position will get closer and closer to be traded - and then, when you are only a couple of contract from being traded, you hit bid market order - and baam, your ask limit order will get traded right away and you are out with 1 tick profit. If you aret oo late, you hit market order at same price you just traded and you are out with just commisions loss.

That isn't quite right.
1. You say you enter a limit order at the Ask and watch the aggressive traders eat liquidity. So that means you have placed a limit order to sell, and it is at the inside Ask/Offer.
2. As the price level is traded you can't "hit bid market order". Firstly terminology, if you hit the bid you are aggressively selling the bid, not buying. Secondly if you buy with a market order you are trading at the Ask price. Therefore you buy the Ask, the same price level your exit order is at (just before the price ticks up and that previous ask price goes bid), and you have made zero on the trade but have paid the commission.

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  #18 (permalink)
 SpeculatorSeth   is a Vendor
 
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If you're going for 1 tick I'd recommend looking for trades where you enter the trade with a limit order instead of a market order.

Here's why I believe that: For a small 1-2 tick scalp, the biggest issue is getting out. You don't want a situation where it moves against you, and you have to hope it ticks back up. You don't want a situation where you have to sit there forever to get filled on your exit. The longer you are in the market, the riskier it becomes for you. So you want the less likely part of your trade to be your entry.

So instead what you want to do is enter in positions where it's hard to get filled, and exit where it is easy to get filled. So if you don't get filled on your entry? Oh well. You missed the opportunity, but you didn't lose any money.

Now the counter to that is that if you use a market order, you can try to catch the edge. Hit into a level just as it is about to leave, and instantly be green or break even. Then you can exit with a limit order at the next price, or just let it ride. Unfortunately, there's already a lot of competition for this one. That's exactly what most robots are trying to do. I might still do it though if I think the next price is really likely to be hit. For instance, we're going up, and I know that 10 is a super key level everyone is looking at. I know we're going to test it, but who knows if we'll go through? That makes 9 a level that is very likely to clear. So I might hit with a market order just as they are about to leave 8, and get out with my limit at 9. Even better if you can stick a crocodile at 9 before we get there since there's always more liquidity on the two inside bids/offers. Place that limit order when we're 4 ticks away so that you can at least be 400th in line instead of 700th.

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  #19 (permalink)
 
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 Mlok 
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matthew28 View Post
That isn't quite right.
1. You say you enter a limit order at the Ask and watch the aggressive traders eat liquidity. So that means you have placed a limit order to sell, and it is at the inside Ask/Offer.
2. As the price level is traded you can't "hit bid market order". Firstly terminology, if you hit the bid you are aggressively selling the bid, not buying. Secondly if you buy with a market order you are trading at the Ask price. Therefore you buy the Ask, the same price level your exit order is at (just before the price ticks up and that previous ask price goes bid), and you have made zero on the trade but have paid the commission.

Wait, you are right. Damn. Sorry. Well I didnt give it much thought when I red about it. But there is some way how to use position in que on limit order to scalp one tick. See this is the reason why you dont listen to random people on internet, because they write things even when they just barely remember them

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  #20 (permalink)
 
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 matthew28 
United Kingdom
 
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Mlok View Post
Wait, you are right. Damn. Sorry. Well I didnt give it much thought when I red about it. But there is some way how to use position in que on limit order to scalp one tick. See this is the reason why you dont listen to random people on internet, because they write things even when they just barely remember them

LOL. Pity, because it almost sounded like you had found the Holy Grail. Oh well.

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