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SPY for algo day trading


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SPY for algo day trading

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  #1 (permalink)
edison new jersey
 
Experience: None
Platform: motivewave
Trading: ES
 
Posts: 69 since Nov 2016
Thanks: 45 given, 18 received

I am planning to day trade SPY using a algo. I was initially leaning towards e-mini (ES) but since this is the first time I am trying algos i want to go with lower leverage. I wanted to ask the experienced traders here if choosing SPY over ES is a good idea. Following are the specs of my trading plan:
1. Day trading only during regular hours (Trades squared off 15 minutes before close)
2. Will be trading 100 units of SPY (scaleout 50 units)
3. Limit order of entry, Market for scaleout and exit
4. Signals based on SPX (S&P 500 index) not on SPY or emini
5. Max risk of 1 point (of SPX) per trade
6. net loosing trades per day is set to 3. (winning trades for the day - loosing trades for the day==3 then halt trading for the day).
7. Halt trading for a day (or more, discretionary) after 3 consecutive loosing days
8. Planning to go with IB but open to suggestions.


I have some questions:
1. What is the break-even Price for SPY for your broker? What is the minimum profit i need to make on a trade in order to break even (considering commission, tax, any, other cost )? For example If I buy a 100 SPY @ 210 then what is the minimum price i need to sell to break-even (no profit no loss).
2. How much leverage does your broker offer you for SPY? I believe most of them require 30% margin for SPY.
3. Can you buy 1 unit of SPY or is there a minimum amount you have to buy. I understand commission etc will make it illogical to buy SPYs below a certain number.
4. Is there anything outrageously wrong about day trading SPY using ALGOs?

Please share your insight.

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  #3 (permalink)
Prince George BC Canada
 
Experience: Advanced
Platform: IBs TWS
Broker: IB
Trading: Stocks
 
deaddog's Avatar
 
Posts: 790 since May 2013
Thanks: 118 given, 1,922 received


There is nothing wrong with your plan.

IB cost in Canada was a minimum $1.00 commission or 1 cent per share. I believe for the US the cost is 1/2 cent per share with the same minimum.

Round trip on 100 shares would be $2.00 If you scale out with 50 shares then it would be $3.00

Yes you can buy only one share, but the commission would be $1.00

FWIW; I traded SPY and QQQ when I was taking strategies live for the same reason you mentioned.

When you talk you are only repeating what you already know. When you listen you might learn something new
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  #4 (permalink)
edison new jersey
 
Experience: None
Platform: motivewave
Trading: ES
 
Posts: 69 since Nov 2016
Thanks: 45 given, 18 received

Hi, What is the leverage IB offers on SPY? Also would you know which brokerage offers the highest leverage on SPY?

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  #5 (permalink)
Christchurch, New Zealand
 
Experience: Beginner
Platform: SC
Broker: IB, BC, Dx Feed
Trading: US Equities
 
Neo1's Avatar
 
Posts: 428 since Jul 2014
Thanks: 471 given, 496 received


jefforey View Post
I am planning to day trade SPY using a algo. I was initially leaning towards e-mini (ES) but since this is the first time I am trying algos i want to go with lower leverage. I wanted to ask the experienced traders here if choosing SPY over ES is a good idea. Following are the specs of my trading plan:
1. Day trading only during regular hours (Trades squared off 15 minutes before close)
2. Will be trading 100 units of SPY (scaleout 50 units)
3. Limit order of entry, Market for scaleout and exit
4. Signals based on SPX (S&P 500 index) not on SPY or emini
5. Max risk of 1 point (of SPX) per trade
6. net loosing trades per day is set to 3. (winning trades for the day - loosing trades for the day==3 then halt trading for the day).
7. Halt trading for a day (or more, discretionary) after 3 consecutive loosing days
8. Planning to go with IB but open to suggestions.


I have some questions:
1. What is the break-even Price for SPY for your broker? What is the minimum profit i need to make on a trade in order to break even (considering commission, tax, any, other cost )? For example If I buy a 100 SPY @ 210 then what is the minimum price i need to sell to break-even (no profit no loss).
2. How much leverage does your broker offer you for SPY? I believe most of them require 30% margin for SPY.
3. Can you buy 1 unit of SPY or is there a minimum amount you have to buy. I understand commission etc will make it illogical to buy SPYs below a certain number.
4. Is there anything outrageously wrong about day trading SPY using ALGOs?

Please share your insight.

Please keep in mind that if you want to day trade SPY( underline) with a margin account, then you will need to keep +25k in your account- Inline with the PDT rule.

"Free markets work because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can"
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  #6 (permalink)
edison new jersey
 
Experience: None
Platform: motivewave
Trading: ES
 
Posts: 69 since Nov 2016
Thanks: 45 given, 18 received


Neo1 View Post
Please keep in mind that if you want to day trade SPY( underline) with a margin account, then you will need to keep +25k in your account- Inline with the PDT rule.

neo, yes i read about the pattern day trader rule. since my system produces about 2-5 trades everyday i fall in that category. I believe this would apply even if i traded ES. would it?

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  #7 (permalink)
Christchurch, New Zealand
 
Experience: Beginner
Platform: SC
Broker: IB, BC, Dx Feed
Trading: US Equities
 
Neo1's Avatar
 
Posts: 428 since Jul 2014
Thanks: 471 given, 496 received


jefforey View Post
neo, yes i read about the pattern day trader rule. since my system produces about 2-5 trades everyday i fall in that category. I believe this would apply even if i traded ES. would it?

No, the PDT rule does not apply to futures/ forex, only equities/ options.

"Free markets work because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can"
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November 11, 2016


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