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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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.
Last edited by ptcm; January 4th, 2014 at 02:30 AM.
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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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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.
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?
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.