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Scalping SPY in small account?


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Scalping SPY in small account?

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  #1 (permalink)
Oakland, CA
 
Experience: Intermediate
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Posts: 83 since Jun 2018
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I'm still learning how to scalp. For my risk tolerance, I'd prefer to scalp "live" (with very small amounts of risk on) vs. on demo.

I'm in a small account which I'll add capital to once I have some evidence of an edge, but it's not there yet.

I'm trying to specialize in ES, but wondering how realistic my fills are. Also, wondering how I'll react with real (despite small) risk on vs. being in demo.

(Before I knew anything about futures I had scaled SPX options but got hammered on the spread.)

I'm wondering if scalping SPY directly would be a good proxy (this way I can put risk on very small amounts of risk in my main equities brokerage account).

Has anyone tried this? Thoughts? Would it translate well going from SPY -> ES, since presumably they move similarly?

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  #3 (permalink)
charlotte nc
 
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Hi smtlaissezfaire,

You can compare the details of the two here.

https://www.cmegroup.com/trading/equity-index/us-index/e-mini-sandp500_quotes_volume_voi.html#tradeDate=20180914

https://finance.yahoo.com/quote/SPY/

They should in theory have similar speeds, direction, relative volume traffic etc. Plenty of HF arb algos keep these running together.

To your question below about the following: "I'm trying to specialize in ES, but wondering how realistic my fills are" This is all relative to what you mean exactly. What are you measuring exactly and when you say realistic I assume you are referring to some back-testing you experienced. If you can give me some idea of what this baseline is, I can tell you if it is realistic or not.

The ES can be a very cruel mistress to trade. When it comes to scalping there is a bit of a paradox to how it works at the microstructure level.

1. Unless you get near the front of the queue, your only path to a fill on a limit order will be toxic. So you will be down 1 tick on every trade. Also in terms of existing via limit orders, unless your target is very far away, and you were in the queue very early, you will need to move beyond your price by 1 tick for the fill. Obviously market orders (Stop losses) are filled automatically, crossing the spread. So this puts you at an insane disadvantage starting out, assuming you have even odds to begin with . If you exclude toxic fills (Price clears the entire queue and moves against you), Your back of the queue fill rate will be near 0%, your 75th percentile in the queue fill rate will be near 10%, and the 50th percentile fill rate will approach only 25%. Only the top 25% of the queue typically get lifted.... So you might be thinking, okay great, so how do I get to the front.

2. But wait, if you are in the front of the queue, you will increase your sweep risk ten fold. With the ES, somewhere between 10% to 20% of all price levels have a sweep that clears 2+ price levels. This occurs often. So if you optimize your strategy to get you near the front of the queue, this may give you a lift on hitting more non toxic fills, but it also gives you 0 time to cancel when a price level sweep occurs. So you will end up getting destroyed with no chance to bail far more often. Even if you in theory wanted to try to get near the front of the queue, you will not know how to determine if you made it or not unless you program your own queue tracking algorythm. The CME has an MBO feed that does this for you, but virtually no one in the retail space has this available. Not Ninjatrader, Tradestation, etc. So you would have to know conceptually how to even attempt to program a good tracking system and then hope that your coding syntax doesn't slow down your algo too much.


The best advice I would give someone in this space: (attempting to scalp the ES) would be to just know your edge and know the house edge going into this. As long as you know this and understand this, you may be able to determine if your trading method can beat the house. But if you go in with the wrong assumptions, you will get killed for obvious reasons.

Best of luck!

Ian




smtlaissezfaire View Post
I'm still learning how to scalp. For my risk tolerance, I'd prefer to scalp "live" (with very small amounts of risk on) vs. on demo.

I'm in a small account which I'll add capital to once I have some evidence of an edge, but it's not there yet.

I'm trying to specialize in ES, but wondering how realistic my fills are. Also, wondering how I'll react with real (despite small) risk on vs. being in demo.

(Before I knew anything about futures I had scaled SPX options but got hammered on the spread.)

I'm wondering if scalping SPY directly would be a good proxy (this way I can put risk on very small amounts of risk in my main equities brokerage account).

Has anyone tried this? Thoughts? Would it translate well going from SPY -> ES, since presumably they move similarly?


In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
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  #4 (permalink)
Hamburg Germany
 
Experience: Advanced
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Broker: DTN IQ
Trading: ES
 
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smtlaissezfaire,

depending on your trade frequency you might also be subject to the pattern day trader rule:

Day-Trading Margin Requirements: Know the Rules | FINRA.org

Regards,

ABCTG

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  #5 (permalink)
Market Wizard
Columbus, OH
 
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iantg View Post

Even if you in theory wanted to try to get near the front of the queue, you will not know how to determine if you made it or not unless you program your own queue tracking algorythm. The CME has an MBO feed that does this for you, but virtually no one in the retail space has this available. Not Ninjatrader, Tradestation, etc. So you would have to know conceptually how to even attempt to program a good tracking system and then hope that your coding syntax doesn't slow down your algo too much.

Ian

I think most trading platforms have this feature. in ninjatrader 8 it's called APQ (approximate position in queue). but keep in mind it is what it is, an approximation

https://ninjatrader.com/support/helpGuides/nt8/en-us/?using_superdom_columns.htm


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

The micro-structure will be different. I do not think it would help. If you want to trade ES then trade ES. Something you could try would be to hold a longer term long position and scalp only against it. You could hold it with options. But, that would be a unique sort of strategy.

I would stick to sim trading until you are confident in your strategy.

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  #7 (permalink)
Lake Michigan (Summer), N. Miami Beach (Winter)
 
Experience: Advanced
Platform: TOS, Ninjatrader
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Trading: indices/currencies/interest rates/energies/metals/grains
 
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iantg View Post
Hi smtlaissezfaire,

You can compare the details of the two here.

https://www.cmegroup.com/trading/equity-index/us-index/e-mini-sandp500_quotes_volume_voi.html#tradeDate=20180914

https://finance.yahoo.com/quote/SPY/

They should in theory have similar speeds, direction, relative volume traffic etc. Plenty of HF arb algos keep these running together.

To your question below about the following: "I'm trying to specialize in ES, but wondering how realistic my fills are" This is all relative to what you mean exactly. What are you measuring exactly and when you say realistic I assume you are referring to some back-testing you experienced. If you can give me some idea of what this baseline is, I can tell you if it is realistic or not.

The ES can be a very cruel mistress to trade. When it comes to scalping there is a bit of a paradox to how it works at the microstructure level.

1. Unless you get near the front of the queue, your only path to a fill on a limit order will be toxic. So you will be down 1 tick on every trade. Also in terms of existing via limit orders, unless your target is very far away, and you were in the queue very early, you will need to move beyond your price by 1 tick for the fill. Obviously market orders (Stop losses) are filled automatically, crossing the spread. So this puts you at an insane disadvantage starting out, assuming you have even odds to begin with . If you exclude toxic fills (Price clears the entire queue and moves against you), Your back of the queue fill rate will be near 0%, your 75th percentile in the queue fill rate will be near 10%, and the 50th percentile fill rate will approach only 25%. Only the top 25% of the queue typically get lifted.... So you might be thinking, okay great, so how do I get to the front.

2. But wait, if you are in the front of the queue, you will increase your sweep risk ten fold. With the ES, somewhere between 10% to 20% of all price levels have a sweep that clears 2+ price levels. This occurs often. So if you optimize your strategy to get you near the front of the queue, this may give you a lift on hitting more non toxic fills, but it also gives you 0 time to cancel when a price level sweep occurs. So you will end up getting destroyed with no chance to bail far more often. Even if you in theory wanted to try to get near the front of the queue, you will not know how to determine if you made it or not unless you program your own queue tracking algorythm. The CME has an MBO feed that does this for you, but virtually no one in the retail space has this available. Not Ninjatrader, Tradestation, etc. So you would have to know conceptually how to even attempt to program a good tracking system and then hope that your coding syntax doesn't slow down your algo too much.


The best advice I would give someone in this space: (attempting to scalp the ES) would be to just know your edge and know the house edge going into this. As long as you know this and understand this, you may be able to determine if your trading method can beat the house. But if you go in with the wrong assumptions, you will get killed for obvious reasons.

Best of luck!

Ian

Dude! What a gloriously well-thought out lucid/informative reply to the original poster. Thank you for 'schooling' him.

Yes - the ES is a 'thick' market bastard!

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  #8 (permalink)
Lake Michigan (Summer), N. Miami Beach (Winter)
 
Experience: Advanced
Platform: TOS, Ninjatrader
Broker: Tradeovate, TOS, Dorman
Trading: indices/currencies/interest rates/energies/metals/grains
 
Posts: 425 since Oct 2009
Thanks: 251 given, 748 received

I have Ninja 8 ready to go but still use Ninja 7.

The in the que feature of Ninja 8 seems nice - but in real time unless you are some kind of savant order flow dude; watching your order and waiting for it to 'clear' is excruciating.

I'm almost of the mind it is better to NOT focus on it and just manage your order/trading edge accordingly.

Haha! Right?

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