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How I Trade For a Living
Started:August 30th, 2016 (10:48 AM) by rocksolid68 Views / Replies:49,155 / 662
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How I Trade For a Living

Old September 19th, 2016, 11:26 AM   #111 (permalink)
Market Wizard
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rocksolid68 View Post
More or less, yes you did.

However, yield in a less-strict sense just refers to gains. It means returns in a less formal way. Equities can have yield in the sense that they give you a return. Same with gold.

When people buy equities, they are hoping for positive returns, correct? Well, the perceived yield on those equities is ~7% in a year. (estimated number; just example).

When I bought bonds this morning, I was not holding them for the yield they give, but rather the yield they may give in difference of price.

This is not easy to explain, but do you understand what I am saying?

If it makes it easier, we can just call it "discount investing" or maybe "value hunting"

Of course, I was just saying that when I understood what you meant by "yield," I understood what you were doing.

Bob.

     
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Old September 19th, 2016, 11:40 AM   #112 (permalink)
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rocksolid68 View Post
Did you like it here? Most people do not like the Winters here

As far as the arbitrage goes, I feel that it still is a good term for it.

What I am doing is finding a correlation, and finding which is trading at a discount.

Example:

ES, ZB, and GC are all trading in tandem. They are all looking fairly bullish today.

ES is at its day high, GC is making new highs, and ZB is halfway to its day high.

Since these are all moving together, and they are all making bullish moves, I want to trade them long. Which one though? Well, the cheapest one! This one is ZB in the example.


If they are all moving together, people want the one with most yield. If ZB is due for an up move and is still cheap, people will want to buy that one higher to match its companions.

Does this make a little more sense?

(PS. I love the anecdotal pieces in your posts. Really is awesome. Glad to have you sharing with us )

I loved the Twin Cities, and cold is something you get used to. When I was in college in Northfield it would never get above zero the first week of February, and -20F was common. Three friends and I hitchhiked to my former roommate's house in Rochester to watch Fran Tarkington's Vikes play Dallas in the Super Bowl in '77. It was -20 that morning when we left and it got down to -30 with a wind chill of -75 that night. By all rights we should have frozen to death waiting for someone to pick us up, but a St. Olaf parent with a van picked all four of us up outside our dorm and dropped us off at my roommate's house. As usual, the Vikes lost.

My Mom lived in Duluth for a few years. My wife and I stayed at an inn called The Mansion once, an old mining magnates' place. Loved it.

About arbitrage: Well, takeover arbs take only one side of the trade, so there is that... . Basically, then, if I understand you correctly, you are deciding which of a group of correlated assets to buy based on which is "cheap", and if it's time to buy. That's one way to go, but you might want to test it against the old truism that when it's time to buy, buy the STRONGEST asset in the class, not the weakest. I've always fallen into the latter camp and I used it in my yield curve trading, but I've never rigorously tested the idea. I think I first read about the concept in something by Stanley Kroll, or maybe it was "Reminiscences of a Stock Operator". But "strongest" is not the same as "most expensive". On a higher time frame it could be cheap, and that's why it's strong. Just stuff to think about.

"You don't need a weatherman to know which way the wind blows..."
     
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Old September 19th, 2016, 11:48 AM   #113 (permalink)
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jstnbrg View Post
I loved the Twin Cities, and cold is something you get used to. When I was in college in Northfield it would never get above zero the first week of February, and -20F was common. Three friends and I hitchhiked to my former roommates house in Rochester to watch Fran Tarkington's Vikes play Dallas in the Super Bowl in '77. It was -20 that morning when we left and it got down to -30 with a wind chill of -75 that night. By all rights we should have frozen to death waiting for someone to pick us up, but a St. Olaf parent with a van picked all four of us up outside our dorm and dropped us off at my roommate's house. As usual, the Vikes lost.

My Mom lived in Duluth for a few years. My wife and I stayed at an inn called The Mansion once, an old mining magnates' place. Loved it.

About arbitrage: Well, takeover arbs take only one side of the trade, so there is that... . Basically, then, if I understand you correctly, you are deciding which of a group of correlated assets to buy based on which is "cheap", and if it's time to buy. That's one way to go, but you might want to test it against the old truism that when it's time to buy, buy the STRONGEST asset in the class, not the weakest. I've always fallen into the latter camp and I used it in my yield curve trading, but I've never rigorously tested the idea. I think I first read about the concept in something by Stanley Kroll, or maybe it was "Reminiscences of a Stock Operator". But "strongest" is not the same as "most expensive". On a higher time frame it could be cheap, and that's why it's strong. Just stuff to think about.

Ahh... the ol' Vik-queens... They never fail to disappoint

This season is the most promising we have had in a while

I used to live in the Twin Cities until just the past couple of years. I must admit, Duluth is a wonderful change from the Twin Cities

As you say buy the strongest one, I think that it is less risk to buy the cheaper one if you put it in a frame of asymmetric returns. Buying the strong one presents a larger stop loss the way I am trading these. This gives me less risk to buy the cheaper one.

Definitely something to note if others are trying this idea! Take notes people! We have a floor trade in the room!

Thanks again

     
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Old September 19th, 2016, 12:09 PM   #114 (permalink)
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rocksolid68 View Post
Ahh... the ol' Vik-queens... They never fail to disappoint

This season is the most promising we have had in a while

I used to live in the Twin Cities until just the past couple of years. I must admit, Duluth is a wonderful change from the Twin Cities

As you say buy the strongest one, I think that it is less risk to buy the cheaper one if you put it in a frame of asymmetric returns. Buying the strong one presents a larger stop loss the way I am trading these. This gives me less risk to buy the cheaper one.

Definitely something to note if others are trying this idea! Take notes people! We have a floor trade in the room!

Thanks again

Stopped rooting for the Vikes the moment I moved to Chicago (January 1 1986, just in time for the only great Bears team ever). Being a Vikes fan was painful, and in Chicago could have been fatal too!

As for having a floor trader in the room, take that with a GIANT grain of salt. Floor traders had advantages available to no one else: super low transaction costs (but high overhead), a direct view of the order flow including which customers were playing and what they were doing, and most importantly the ability to buy the bid and sell the offer. It was NOT FIFO, and that's very important. We could lean on existing orders and scratch trades if they felt iffy almost for free. We were first in line, and we could also get to the orders quicker. I made a career of front running the cash/futures arbs; we had Cantor Fitzgerald, Liberty, and Garban screens and I could tell when they were about to hit the bids and I'd get there first. But we did trade a lot, and we had to deal with the same psychological pressures as every other trader.

Please do not consider me to be an expert on anything but trading psychology. I am not yet a success as a technical screen based trader. I have a lot to learn from all of you.

"You don't need a weatherman to know which way the wind blows..."
     
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Old September 19th, 2016, 12:11 PM   #115 (permalink)
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jstnbrg View Post
Stopped rooting for the Vikes the moment I moved to Chicago (January 1 1986, just in time for the only great Bears team ever). Being a Vikes fan was painful, and in Chicago could have been fatal too!

As for having a floor trader in the room, take that with a GIANT grain of salt. Floor traders had advantages available to no one else: super low transaction costs (but high overhead), a direct view of the order flow including which customers were playing and what they were doing, and most importantly the ability to buy the bid and sell the offer. It was NOT FIFO, and that's very important. We could lean on existing orders and scratch trades if they felt iffy almost for free. We were first in line, and we could also get to the orders quicker. I made a career of front running the cash/futures arbs; we had Cantor Fitzgerald, Liberty, and Garban screens and I could tell when they were about to hit the bids and I'd get there first. But we did trade a lot, and we had to deal with the same psychological pressures as every other trader.

Please do not consider me to be an expert on anything but trading psychology. I am not yet a success as a technical screen based trader. I have a lot to learn from all of you.

A humble man, hm?

I think that we all have lots to learn from one another. I learn more every day here than I do in school!

(I wish that was a joke)

     
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Old September 19th, 2016, 12:14 PM   #116 (permalink)
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bobwest View Post
Old? You're not old.

There's the (ridiculous) thing that you're only as old as you feel. Let's just avoid that for a moment.

Bob.

Yeah, I hear that 59 is the new 29. But I don't believe it, my arthritis tells me otherwise, as well as the fact that I've become invisible and I can't text worth a damn and I don't know how to use Twitter.

"You don't need a weatherman to know which way the wind blows..."
     
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Old September 19th, 2016, 12:23 PM   #117 (permalink)
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rocksolid68 View Post
A humble man, hm?

I think that we all have lots to learn from one another. I learn more every day here than I do in school!

(I wish that was a joke)

I don't know that I'm really that humble. One of the things that always attracted me to trading was that we have very objective measures of performance. In corporate life you can be good at your job but still not be recognized, or worse; this happened to me at Harvest States. In trading the bottom line, and the consistency with which you achieve it, is all the performance metric needed. And it's by that metric that I say I'm not an expert. I still find myself making some really bonehead mistakes, and also not yet really being clear on when to stand aside.

In a sense all of my pit stories are "boring stories of glory days".

"You don't need a weatherman to know which way the wind blows..."
     
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Old September 19th, 2016, 12:40 PM   #118 (permalink)
Market Wizard
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jstnbrg View Post
Yeah, I hear that 59 is the new 29. But I don't believe it, my arthritis tells me otherwise, as well as the fact that I've become invisible and I can't text worth a damn and I don't know how to use Twitter.

Well, there is all that....

I also notice that I will say things like "these kids...." That's a sure giveaway.

Bob.

     
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Old September 19th, 2016, 08:04 PM   #119 (permalink)
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I am working on the recap. Just finished eating dinner. I didn't have the time earlier.

Today went pretty well for me. Patience really paid off.

     
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Old September 19th, 2016, 08:19 PM   #120 (permalink)
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Recap for day:

Live ES: $925
Live ZB: $250
SIM GC: -$30


Let's go over ES first:
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-Waiting to short all morning, but not liking price action nor TICK, so I stayed on the sidelines.
-Honestly, between you and me, I wouldn't have been able to withhold if it weren't for trading GC and ZB
-We got a pretty extreme TICK reading on a push above VWAP. I figured it would be exhaustion due to low volume today
-So I shorted 4 lots fairly quick thinking that it would go lower quick.
-Waited and waited until it broke lower where I added one more contract.
-I took 3 contracts off at OR-High. I was not sure if we would be able to extend the day's range today, so I was playing tight targets
-I took another off in front of OR-Low
-I added one contract at 36.00
-I took profits at Y-High.
-Class time and done for day. Missed a chance to hold longer for Y-VPOC, but hey, I am not complaining


Gold:
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-Not much to say
-Gold was very lame as far as movement goes today. I was pretty bummed that none of my trades got the chance to run
-I scalped around more than I am proud of, but hey, -$30 isn't too shabby


ZB:
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-Played the long side right away.
-2 lots long, made decent profit on them. Had an open PnL of ~$600 but ended up with ~$200
-Then I took a ~$60 loss.
-Lastly, I took a one lot long
-I made 4 ticks or so (~$120)



All in all, a good day for the live account!

I am a tad disappointed in my GC trading today, but what can I say, you can't make the markets move like you want

I do want to say a few things about my ES returns lately. I will post later!

     
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