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Long and Short Positions at the Same Time?


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Long and Short Positions at the Same Time?

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  #1 (permalink)
 tderrick 
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I can't believe I haven't run across this idea until now. It works in Market Replay, but I'm not sure
if the exchanges would allow it....

Is it possible to have an overall long or short position going, but then scalp along the way either long
OR short?

I love to trade ping pong edges in tight consolidation. However, the macro trend may still be valid.

So I guess the question is - Can you have a long contract going then short a scalp along the way,
of course with a separate contract?

How long have I been trading ?

NQ in particular ..

AMP / CQG

grazie


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 cory 
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open a sub account then you can put on an opposite trade.

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 rmejia 
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Could try futures pairs trades, or with options can be done with the same underlying.

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 steve2222 
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Hi tderrick

I think this is a duplicate thread.

See below links





As you can see one option I mention (and others) is that NT lets you SIMULATE being short and long at the same time (whether you are trading Live or SIM) without needing to bother your broker. So you could trying Simming this strategy first in NT Simulation mode.

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 solotrader 
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tderrick View Post
So I guess the question is - Can you have a long contract going then short a scalp along the way, of course with a separate contract?e

Wash trades is considered in the US criminal activity.

"No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash trades or wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means."

https://www.cmegroup.com/tools-information/lookups/advisories/market-regulation/CMEGroup_RA1308-5.html

Exceptions are not clear.

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  #7 (permalink)
 tderrick 
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steve2222 View Post
Hi tderrick

I think this is a duplicate thread.

See below links





As you can see one option I mention (and others) is that NT lets you SIMULATE being short and long at the same time (whether you are trading Live or SIM) without needing to bother your broker. So you could trying Simming this strategy first in NT Simulation mode.


grazie,

I looked at those threads and it appeared the concept there was to take long term positions opposite
each other with different brokers. I would assume to bail on the one that fails.


My question is - one broker, with two contracts having opposite positions at some point.

An example being - Long over all for a daily swing in markets throughout the day, but then
coming across a consolidation area that can be both bought and sold at the range edges until
the direction is resolved.

As I stated, this is allowed within Market Replay / Ninja.

I suppose I will just try it tomorrow. I will know quickly if I get that lovely NT rejection crash sound.

I mean, they are separate contracts. Why would you not be able to have one contract to buy and one to sell?

We shall see ...


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kamicrazy
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I don't think this is legal in the US.

It is commonly called a hedge position. Where you have a long and short position in the same market at the same time.

These were common in the Forex cash market a few years ago and then they too were regulated out.

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 tderrick 
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kamicrazy View Post
I don't think this is legal in the US.

It is commonly called a hedge position. Where you have a long and short position in the same market at the same time.

These were common in the Forex cash market a few years ago and then they too were regulated out.


yes... I have seem this mentioned on futures.io (formerly BMT) before.

As I would not be using the concept as a hedge situation, just trading a separate time frame / situation, I
could see how larger players could use the opportunity to manipulate the market.


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  #10 (permalink)
kamicrazy
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It doesn't matter if you intend to trade different time frames.

If you have an overall long position you intend to hold overnight and then enter into an intraday short position you will simply exit your long.

This is due to regulations surrounding the handling of contracts to prevent a situation where you hold both positions.

You need two accounts to do this and as someone has already posted it could still be illegal.

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 tderrick 
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kamicrazy View Post
It doesn't matter if you intend to trade different time frames.

If you have an overall long position you intend to hold overnight and then enter into an intraday short position you will simply exit your long.

This is due to regulations surrounding the handling of contracts to prevent a situation where you hold both positions.

You need two accounts to do this and as someone has already posted it could still be illegal.


This does appear to be the case.

Question answered.

grazie


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  #12 (permalink)
kamicrazy
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The reason why Ninja Trader supports it in Sim mode is likely for one of these two reasons.

1) You used to be able to do this in the Forex cash market. The biggest example was MT4. If you had a long, opening a short would not close the long, you would have two open positions. In order to close a position you had to use a "close position" command.

I don't think all forex cash brokers did this. I don't remember MB Trading supporting this but I could be wrong.

2) It is legal in other jurisdictions. Along with increased leverage, like 400:1, brokers in other countries may offer such features. However most of these brokers will not allow US citizens to open an account...

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 tderrick 
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kamicrazy View Post
The reason why Ninja Trader supports it in Sim mode is likely for one of these two reasons.

1) You used to be able to do this in the Forex cash market. The biggest example was MT4. If you had a long, opening a short would not close the long, you would have two open positions. In order to close a position you had to use a "close position" command.

I don't think all forex cash brokers did this. I don't remember MB Trading supporting this but I could be wrong.

2) It is legal in other jurisdictions. Along with increased leverage, like 400:1, brokers in other countries may offer such features. However most of these brokers will not allow US citizens to open an account...


Thanks for the market insight

I notice you are a Mac user. ... Do you run the trading software off a PC partition - Bootcamp ?
or leave OS X running and use Parallels?


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  #14 (permalink)
kamicrazy
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I use Sierra Chart through wine and I also have a PC I use to run multi charts. I connect to my PC using RDP.

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 tderrick 
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kamicrazy View Post
I use Sierra Chart through wine and I also have a PC I use to run multi charts. I connect to my PC using RDP.


Ah, ... of course.. I forgot that option


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 cory 
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solotrader View Post
Wash trades is considered in the US criminal activity.

... Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades.....

now you know how CME feels about your money.

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 steve2222 
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I recalled I explored this strategy just over a year ago and had several email exchanges with my broker Mirus.

Aside from confirming the ability of NT to simulate this, Mirus confimed I could do this ie go long and short at the same time as long as i did this through two seperate accounts with them (which had to be in the same name).

I assume the fact that it is transacted through seperate accounts must satisfy the rules/law. I never actually persued it as I determined there was not really a viable strategy there ie double the margins, running two funded accounts etc - but I did get as far as receiving the paperwork from Mirus to open the 2nd account.

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 SMCJB 
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solotrader View Post
Wash trades is considered in the US criminal activity.

"No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash trades or wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means."

https://www.cmegroup.com/tools-information/lookups/advisories/market-regulation/CMEGroup_RA1308-5.html

Exceptions are not clear.

I believe there is a difference between "having" long and short positions at the same time and "entering" or "creating" long and short positions at the same time. The latter is obviously a wash trade. but the former may not be. Note that the rule you quote references "orders" and not "positions". Either way it's probably something safest to avoid. As solotrader said it is a criminal offense in the US and people have been penalized for wash trades.

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 traderwerks 
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solotrader View Post
Wash trades is considered in the US criminal activity.

"No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash trades or wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means."

https://www.cmegroup.com/tools-information/lookups/advisories/market-regulation/CMEGroup_RA1308-5.html

Exceptions are not clear.


cory View Post
now you know how CME feels about your money.

The wash sale rule ( 534 ) is designed to stop people from doing 'bad' things. It is also prohibited by the Commodity Exchange Act.

I comes down to why would anyone want to go long and short at the same time. No matter what you do, at the end of the day, it is still your net position that matters.

Bart Chilton spoke about it last summer in Chicago talking about firms cheating by trading with themselves.

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 tlopez51 
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traderwerks View Post
The wash sale rule ( 534 ) is designed to stop people from doing 'bad' things. It is also prohibited by the Commodity Exchange Act.

I comes down to why would anyone want to go long and short at the same time. No matter what you do, at the end of the day, it is still your net position that matters.

Bart Chilton spoke about it last summer in Chicago talking about firms cheating by trading with themselves.

I can think of perhaps one reason to go long and short at the same time. When you pairs trade, isn't the objective to drop the loosing side and go the way of the winning position? Hence, once you've established the trend you go with the trend is your friend rule?

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 cory 
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traderwerks View Post
The wash sale rule ( 534 ) is designed to stop people from doing 'bad' things. It is also prohibited by the Commodity Exchange Act.

I comes down to why would anyone want to go long and short at the same time. No matter what you do, at the end of the day, it is still your net position that matters.

...

There is no need to explain why (plenty of threads here and other sites debate on its merit). bottom line, its my money I should be able to buy and sell as I please.

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 tlopez51 
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cory View Post
There is no need to explain why (plenty of threads here and other sites debate on its merit). bottom line, its my money I should be able to buy and sell as I please.

Ditto! Besides, if you trade in an IRA like me there's no wash sale rule in effect for this type account.

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 tderrick 
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traderwerks View Post

I comes down to why would anyone want to go long and short at the same time. No matter what you do, at the end of the day, it is still your net position that matters.

.



The original premise was to, say, be in a long macro trade, but scalp the edges of consolidation ranges you
encounter along the way. Which, of course would encompass both long and short trades.

So, at some point, you would have a long contract and a short contract going at the same time.

I think I will still attempt it and see what happens


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 SMCJB 
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tlopez51 View Post
Ditto! Besides, if you trade in an IRA like me there's no wash sale rule in effect for this type account.

Different type of wash sale!

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 tlopez51 
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SMCJB View Post
Different type of wash sale!

Nice catch! There was a time I traded in both a taxable and IRA accounts and it's definitely a head scratcher.

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 baywolf 
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tderrick View Post
I can't believe I haven't run across this idea until now. It works in Market Replay, but I'm not sure
if the exchanges would allow it....

Is it possible to have an overall long or short position going, but then scalp along the way either long
OR short?

I love to trade ping pong edges in tight consolidation. However, the macro trend may still be valid.

So I guess the question is - Can you have a long contract going then short a scalp along the way,
of course with a separate contract?

How long have I been trading ?

NQ in particular ..

AMP / CQG

grazie

Wait... What the OP describes doesn't seem to match what CME's definition of wash trade is.

CME is looking to prevent traders from giving the appearance like you are really taking a bona fide position, but are not really because you are placing simultaneous hedge trades at the same price.

An example: placing an iceberg (100 contracts) limit order at 100.01 in acct A and then having a marketable order at 100.01 in acct B. This is deemed malicious because you did not take a bona fide position in the market. It might trigger people and algorithms to pull their limit orders and cause the market to move in your desired direction, where you could then enter at a more favorable price.

What the OP I think is describing is scalping an upward support and resistance price channel. He might have both a limit buy order at 99.95 and a limit sell order at 100.05, but they certainly wouldn't execute simultaneously. He is not acting maliciously.

In that case I don't see why you would need more than one account. Am I missing something?

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 SMCJB 
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baywolf View Post
Wait... What the OP describes doesn't seem to match what CME's definition of wash trade is.

CME is looking to prevent traders from giving the appearance like you are really taking a bona fide position, but are not really because you are placing simultaneous hedge trades at the same price.

An example: placing an iceberg (100 contracts) limit order at 100.01 in acct A and then having a marketable order at 100.01 in acct B. This is deemed malicious because you did not take a bona fide position in the market. It might trigger people and algorithms to pull their limit orders and cause the market to move in your desired direction, where you could then enter at a more favorable price.

What the OP I think is describing is scalping an upward support and resistance price channel. He might have both a limit buy order at 99.95 and a limit sell order at 100.05, but they certainly wouldn't execute simultaneously. He is not acting maliciously.

In that case I don't see why you would need more than one account. Am I missing something?

...
SMCJB View Post
I believe there is a difference between "having" long and short positions at the same time and "entering" or "creating" long and short positions at the same time. The latter is obviously a wash trade. but the former may not be. Note that the rule you quote references "orders" and not "positions".


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 ptcm 
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Recently I've done an experiment on having both long/short position(SSO/SDS) at the same time to trade the S&P index.
Instead of going completely long or short, I just adjust the ratio of the two position to get a net exposure.

Since I always have a position on the right side(though the strategy could be in -ve territory), psychologically I feel less biased when I have to flip directions, and more importantly , I would have less tendency sticking or adding to the losing positions. Somehow our brains are being short-circuited for X amount of time whenever we have a wrong position and more so when we are completely on the wrong side, and typically that's precisely when traders make irrational decisions, especially intraday.

In terms of commission, it doesn't make much sense but I feel that the psychological advantage is worth more than the comm I paid since I am not a HFT trader.
Most traders wouldn't do this due to comm but to me, the psychological disturbances cost me a lot more than comm historically. so net net still a +.

I am very interested to explore further on whether this practice works for other traders over the long term, especially on equity index ETF. For futures, since the positions got offseted in the same account and comm are also much higher relative to ETFs. I am not sure if it's practical to do it that way.

I did a search after my thread was closed due to its duplicated content, but majority of the discussions were not focused on the psychology side of it / on ETF products.

many thanks in advance.

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 tlopez51 
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ptcm View Post
Recently I've done an experiment on having both long/short position(SSO/SDS) at the same time to trade the S&P index.
Instead of going completely long or short, I just adjust the ratio of the two position to get a net exposure.

Since I always have a position on the right side(though the strategy could be in -ve territory), psychologically I feel less biased when I have to flip directions, and more importantly , I would have less tendency sticking or adding to the losing positions. Somehow our brains are being short-circuited for X amount of time whenever we have a wrong position and more so when we are completely on the wrong side, and typically that's precisely when traders make irrational decisions, especially intraday.

In terms of commission, it doesn't make much sense but I feel that the psychological advantage is worth more than the comm I paid since I am not a HFT trader.
Most traders wouldn't do this due to comm but to me, the psychological disturbances cost me a lot more than comm historically. so net net still a +.

I am very interested to explore further on whether this practice works for other traders over the long term, especially on equity index ETF. For futures, since the positions got offseted in the same account and comm are also much higher relative to ETFs. I am not sure if it's practical to do it that way.

I did a search after my thread was closed due to its duplicated content, but majority of the discussions were not focused on the psychology side of it / on ETF products.

many thanks in advance.

Instead of going completely long or short, I sometimes go with the cash settled S&P 500 index, SXPL (3x Bull) and SXPS (3x Bear), as well as the non-cash settled SSO (2x Bull) and SDS (2x Bear) leveraged ETF's. As long as your assumption is correct, the levered nature of these products will allow you to realized substantial gains in a short period of time. For a directional play I also tend to go with ES/2x NQ ratio spread.

I am not sure about the psychological effects as I try to leave all emotions out of the trading equation anyways. However, I would assume that the lesser the staying power one has or if quite frequently tend to over position size, the greater the psychological effects can play a major role which, is precisely why traders make irrational decisions to begin with.

Commissions is what you have to pay-to-play so can't see why it would even be a factor.

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 GFIs1 
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I have some friends trading forex with a well known german broker - on ONE account -
(and yes - there are several brokers offering this possibility) having a forex position and putting
in the hedge position
of the same size in the opposite direction just to block
their "wins" or "losses" while there were no longer at the computer.
Coming back to the screen they dump the position running in the false direction.

Of course I could never understand this behaviour as the spread and commission part
was not really "HOMO Oeconomicus like"

Anyway - every trader has a different attempt

GFIs1

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 tlopez51 
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GFIs1 View Post
I have some friends trading forex with a well known german broker - on ONE account -
(and yes - there are several brokers offering this possibility) having a forex position and putting
in the hedge position
of the same size in the opposite direction just to block
their "wins" or "losses" while there were no longer at the computer.
Coming back to the screen they dump the position running in the false direction.

Of course I could never understand this behaviour as the spread and commission part
was not really "HOMO Oeconomicus like"

Anyway - every trader has a different attempt

GFIs1

For lack of a better analogy/words, I simply see it to be like having either a stop or reversal strategy in play. Difference, a stop kicks-in and you're out of the trade altogether. Now you have to establish a new position. A reversal keeps you in the trade and hopefully for a longer period of time where the momentum/trend is headed. You just have to actively manage your positions more.

In essence pairs trading is kind of a similar approach to a reversal strategy. Difference, on entry you are waiting for the trend to be well established. More importantly your account should not be getting crushed while you are waiting to determine trend direction.

Personally I think it's more about if you like to remain engaged. However, there's never free lunch. Profiting is all about risk taking and commissions should never enter in the equation. I don't know where anyone can trade free of commissions. Then never allow the psychological effects of lossing on trades determine the next one.

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 ptcm 
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I happened to do this L/S adjustment on SSO/SDS positions again last nite(on this side of the globe) when S&P tried to hold the 1830 level. I was trading in size, and time and time again I feel that the cognitional responses I had real-time when having both L/S positions were much more effective, and more so when taking reversed breakout kind of entry points.

The ability to turn quickly inversely correlates to the bias built up progressively by having just one directional position. I underestimated this psychological effect for a long time.

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 tlopez51 
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cory View Post
open a sub account then you can put on an opposite trade.

If you have two separate accounts with the same broker then you can effectively log in to both accounts using Ninja Trader and with a single broker license key. I do this on two separate PC's using RDP to access the second one. Don't know if you can do this with a sub account though.

Having two separate accounts allows you be short and long at the same time or you can be short/long in one and scalp trade from the second account.


Don't see that there's anything illegal about this whether from a licensing perspective nor wash sale rule.

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 solotrader 
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tlopez51 View Post
If you have two separate accounts with the same broker then you can effectively log in to both accounts using Ninja Trader and with a single broker license key. I do this on two separate PC's using RDP to access the second one. Don't know if you can do this with a sub account though.

Having two separate accounts allows you be short and long at the same time or you can be short/long in one and scalp trade from the second account.


Don't see that there's anything illegal about this whether from a licensing perspective nor wash sale rule.

If you make money the vague rules may apply to you. Why don't you check with your broker and report here the reply? I think this is a too serious of a situation to rely on intuition.

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 tlopez51 
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solotrader View Post
If you make money the vague rules may apply to you. Why don't you check with your broker and report here the reply? I think this is a too serious of a situation to rely on intuition.

There's nothing vague, irrational nor mystical about it. Doesn't matter if you make or loose money. You can have as many trading accounts and with as many brokers as you like. For all intents and purposes, if all your accounts are ligitimate and not set up for the purpose of any laundering schemes, it is legal and wash sales rules don't apply. Many professional traders do this all the time. Moreover, you'd be a fool to have all your money with any one broker/firm. From a risk management perspective it's highly dangerous.

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 Itchymoku 
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I guess what the flipper did playing both sides of the market spoofing is illegal then. I assume the big players still get away with it if their orders aren't hit on the other side? Maybe they're able to play both sides of the market by simply having such a large position and selling it off at certain levels and buying back at certain levels. Could someone elaborate?

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Itchymoku View Post
I guess what the flipper did playing both sides of the market spoofing is illegal then. I assume the big players still get away with it if their orders aren't hit on the other side? Maybe they're able to play both sides of the market by simply having such a large position and selling it off at certain levels and buying back at certain levels. Could someone elaborate?

A flipper would still only have one position.

Spoofing is the activity of putting out fake bids/offers - but even if one of the fake bids/offers got filled - he'd still only have one position.

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 Arby 
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cory View Post
open a sub account then you can put on an opposite trade.

You can do this with separate accounts. You could be long on a major upswing, possibly staying in the trade for a significant amount of the day. As a viable scalping opportunity presents itself you could short that in a separate account.

You could then choose to exit the scalp when you are satisfied and your long will still be in place. If the scalp ends up becoming a valid reversal you can exit the long and you are now already in a profitable short.

But you do need to open a separate account.

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 quant007 
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Advanced Trading: Going Long and Short on the Same Instrument in the Same Account - Traders Exclusive - Market news and trading education with trading videos on stocks, options and forex from the exchange floor of the CME Group via articles on tradin

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 aquarian1 
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tderrick View Post
grazie,

I looked at those threads and it appeared the concept there was to take long term positions opposite
each other with different brokers. I would assume to bail on the one that fails.


My question is - one broker, with two contracts having opposite positions at some point.

An example being - Long over all for a daily swing in markets throughout the day, but then
coming across a consolidation area that can be both bought and sold at the range edges until
the direction is resolved.

As I stated, this is allowed within Market Replay / Ninja.

I suppose I will just try it tomorrow. I will know quickly if I get that lovely NT rejection crash sound.

---------

We shall see ...

I don't think your strategy is a wash trade (i.e. is illegal)

Q1: What is the definition of a wash trade?

A1: A wash trade is a form of fictitious trade in which a transaction or a series of transactions give the appearance that bona fide purchases and sales have been made, but where the trades have been entered into without the intent to take a bona fide market position or without the intent to execute bona fide transactions subject to market risk or price competition. Parties who initiate, execute or accommodate transactions which they know, or reasonably should know, will achieve a wash result shall be in violation of Rule 534.

A wash trade requires:

a) that the transaction or series of transactions produces a wash result - meaning the purchase and sale of the same instrument at the same price, or a similar price, for
accounts with the same beneficial ownership or for accounts with common beneficial
ownership; and

b) that the party(ies) intended to achieve a wash result. Intent may be inferred from evidence of prearrangement or from evidence that the orders or trade(s) were structured, entered or executed in a manner that the party(ies) knew, or reasonably should have known, would produce a wash result.

..........
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MichaelFlowTrader
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I hate adding to an old thread but I've read about this a bit. Below is my idea of how I would do it in separate accounts, during low volatility times, when the market is moving in a predictable range. My goal would be to accumulate and distribute while having (Inventory) on both sides of the market.

I would accumulate my Sell (Inventory) when price hits the R at the top of the range. I will distribute along the way while still carrying a net short position in the market.

The same will be true for the Buy (Inventory) accumulating towards the bottom of the range, distributing at the mid-line and towards the top.

As long as price stays in balance, within this range, I will continue to keep my Buy/Sell inventory. If a breakout happens and has strength, I will 'puke out' on the weak side and keep my inventory on the strong side.

Perhaps a bad idea but I saw this being discussed on another forum with links here.



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 Xtrader22 
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tderrick View Post
I can't believe I haven't run across this idea until now. It works in Market Replay, but I'm not sure
if the exchanges would allow it....

Is it possible to have an overall long or short position going, but then scalp along the way either long
OR short?

I love to trade ping pong edges in tight consolidation. However, the macro trend may still be valid.

So I guess the question is - Can you have a long contract going then short a scalp along the way,
of course with a separate contract?

How long have I been trading ?

NQ in particular ..

AMP / CQG

grazie

You can trade "spreads" they just can't be on the same contract using the same commodity, index or financial. But its common to trade calender spreads such as long ESZ18 and short ESH19 or Long ESZ18 and short YMZ18

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 vk79 
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Now that we have Micro contracts, would it be considered as Wash Trade if I try hedging with one mini and 10 micro contracts? In other words can long 1 mini and short 10 micro contracts? I looked everywhere but couldn't find an answer.

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 SMCJB 
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A wash trade is intentionally buying and selling at the same time.

Being Long ES and short MES is not a wash trade and is very allowable. Also from a margin standpoint if you are for example Long 1 ES and Short 5 MES you will get margined as if your position was Long 5 MES since they offset.

In addition many of the physical delivery micro's are fungible/convertible into the full size contracts. So if you are long 10 M6E and short 1 6E, you can ask you broker to offset the positions. This is definitely true for all 5 micro currencies (M6A, M6B, MCD, M6E, MJY), Gold (MGC) at a 10:1 ratio and Silver (SIL) at a 5:1 ratio. Could be others that I'm not yet aware of.

You can't do this with financially settled contracts but since their margins offset, you don't need to worry about it.

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