Broker/Data: Advantage, Trading Technologies, OptionsCity, IQ Feed
Favorite Futures: CL, NG
Posts: 1,040 since Jul 2010
Thanks: 1,713 given,
OK, thanks for clarifying. Yes, many traders come to the ES simply because they need to put a very large amount of capital to work and the ES is one of the most liquid contracts available. The order book has thinned out lately but that's mostly attributed to the increased volatility which is allowing traders to achieve most likely the same trading success with smaller position size. Don't get me wrong, there are still some big orders coming through for example yesterday at around 11AM EST, I saw a buy order come in at 1,000 lot. Obviously this was during a period of higher liquidity but for 100 lot, you can pretty much trade that size all day long. Also, a lot of the larger orders are shredded into the market.
Not all 100+ lot traders are placing hedges. There are a lot just going about the traditional futures trading method (spec trades) for a few ticks/points. One should look at position sizing in the sense of risk vs. reward. Your position size should always be reflective of your a/c equity's risk tolerance (plus experience/success). I do know traders who trade 100+ lots from their home office. There shouldn't be any difference in the way you trade relative to your position size unless of course your throwing 4 figure lots around. But as a discretionary trader just looking to make a living, trading a 100 lot with a daily goal to be net positive of say 2 points will give you a gross amount of around $10,000 per day. I know many who are more than satisfied with that amount, lol.
The following 2 users say Thank You to Private Banker for this post:
I'm sorry if this comes off as a noob question, but what negative consequence does HFT have on the short term 2-3 point 100 contract trader. I mean, I know HFT might perpetuate down trends and thus make long term investors hesitant to put their money into the market, but i'd assume a trader could take advantage of this by shorting the down trend. Perhaps HFT creates more chaotic spontaneity or sideways movement compared to a few years ago. I just have no means for comparison because I've only been trading the futures market the past year. However, I've noticed in times of crisis for some reason or another when there is a lot of liquidity, and I assume HFT, the trending moves are more uniform. Maybe HFT picks up on large orders and tries to counter them pushing the market to a point where that large order gets stopped out and thus giving momentum to the counter movement?
100 contracts is not a block... during the first half and last hours of the markets, when there are very little retail activity... you can swept the book and clear 10K with very little impact, at most losing a tick ... you can scalp 100 contracts without issues during those times, depending on your definition of scalping... and assuming you know what you are doing of course.
I wouldn't call 2-3 ES points scalping. I am no expert scalper, but I find the very short-term direction harder to read than before. When everybody and their grandmother is using sophisticated algorithms for order entries, it makes the tape harder to read. Reading the tape and using market internals used to be enough to extract a decent living in the good ol' days, but it's harder now. That being said, I find that the medium-term swings are much easier to trade. The algorithms often tend to flock, thus creaing more follow-through. I'm making more money and trade with less stress, so I guess it's a win-win...
The following 4 users say Thank You to Lornz for this post:
does it really matter if real? I believe more than likely is not real... first, the level of question.. really? $5MM and you are business savvy and you only target $5K a day on average? rather silly... second, anyone with that level of capital would have advisors and not waste their time trying to learn to trade when their current business already makes them rich, why start something anew when you are making a killing on something else? in any event, I responded not because I believe it was true or false, but rather because I saw the question as a valid one and more than likely if anyone ever gets to that level of capital they would then have an idea and recall what we all wrote back then...
Seems to me that the intent of the OP was simply to get some guidance on a simple system to make the return he wants. The OP (mistakenly) assumed that making the $3-5k per day on $5mm should be something that could be simply achieved. Another poster pointed out that this is around 20%-25% per year and I think this highlights the contradiction. The OP stated they wanted a "lock" - but the fact is, there is no such thing as a SIMPLE "lock" on a 20-25% roi on a yearly basis. Ask yourself - if there was a "lock" on that kind of return, what would the trading environment look like? IOW, what would the markets look like? That kind of return, IMHO, is just not something you can achieve without a considerable amount of work, experience, and SKILL.
The OP doesn't want to learn how to trade - he/she wants a methodology that uses a strategy that lies outside of directional trading.
@arbman1 - there is definitely good advice for you on this thread, I would summarize it as:
- you won't make that kind of return with a simple, fixed strategy without a lot of work beforehand (perhaps 3-5 years of work).
- Look into option spread strategies. Look into simple, fixed strategies like masterthegap.com but realize that you will have an incredibly high hurdle of "learning how to trade" to overcome before you can make money with a "simple, fixed system".
- If you want to learn how to trade - hire yourself a good coach and a good trading psychologist. I would recommend Jeff Quinto as a trading coach and Andrew Menaker as a trading psychologist. Then prepare yourself for a difficult but rewarding challenge that may last a long time but could also provide some of the your proudest moments of personal achievement.
- There are easier ways to achieve a consistent return on equity that would be available to you because of your equity - many have suggested these here. Also consider purchasing tax liens - most yield 18-20% and if you're smart about it you will have extremely low risk.
Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert