[Qiman]

One problem that I see is that many newer traders are trying to use scalping methods on the ES, and there is often so much back and forth arbitrage movement that they often get stopped out. It can get pretty noisy with all the program trading -- robots in a tug of war. But if trend following with a large enough wiggle room for an intelligent stop, then it can be a much more effective instrument. With that being said, I still prefer the NQ for its tick size, smoother movement and less arbitrage activity. And some days much better range as well.

As someone trained in both international economics and geopolitics, I really prefer the contracts that have much to do with the world economy in a more direct way, i.e., the currencies and quasi-currencies. I too prefer the currency futures over indexes, where I can apply my education more effectively. The 6A, 6B, 6C, 6E, 6J, 6S, all of them can be very lucrative at their own times. And GC and CL have times where the trends are amazing. Nice that we futures traders have so many options. I am very grateful for this amazing market and wouldn't trade it for any other!

[TheNegotiator]

Originally Posted by Qiman »

One problem that I see is that many newer traders are trying to use scalping methods on the ES, and there is often so much back and forth arbitrage movement that they often get stopped out. It can get pretty noisy with all the program trading -- robots in a tug of war. But if trend following with a large enough wiggle room for an intelligent stop, then it can be a much more effective instrument.

Yeah, that is a good point. To add to it, not only do the noobs often have a totally unsuitable internet connection, but they are competing with algos which have the fastest connection right next to an exchange and they have near zero reaction time for their decision-execution time. It's just a big exciting fruit machine basically for these guys!

[steve46]

Okay, lets see if we can get past the urban myth about automated execution (among other things)

First, automated execution is not new and is just a part of this market. It affect all markets not just the NYSE so if any of you want to become professionals you are going to have to deal with it....not just the newbies...
Second...it really doesn't affect new traders much...what really causes new traders problems is their own ignorance and the fact that for the most part newbies are unwilling to take the time to get a decent education about how the markets work...and frankly reading all the misconceptions about automated trading here doesn't help..
Now I am not here to put on a seminar but what I am willing to say is this....once you understand what automated trading is about, and how it is implemented, actually you can USE that knowledge to position yourself in such a way as to benefit from it...for example in my classes we position ourselves in front of cirtical time periods when we expect automated execution to occur...when we are correct, that automated activity is the "fuel" that propels the market to our profit target...the point is that knowing when to trade...and when to stand aside is important...and newbies (and apparently newbies aren't the only ones) haven't done the homework necessary to know how to act in this regard.
So Negotiator (sir or madam) here's my offer to you...if you want I will make it possible for you to observe and see how it is done...no strings, no concern on my part either way...that way you can make an informed judgement about this subject and perhaps come away with something of value for your own trading...
let me know..
Best Regards
Steve

[TheNegotiator]

Steve, thank you for your kind offer to show me the way. However, I am quite happy the way I trade and make money doing so. Not to say you are ineffective trading the methods you use. But what you are talking about is not the point I was making. I have seen noob traders with slow computers and appalling connections lose lots of money down to naive attempts at scalping the market. It isn't the main reason they lose. But it happens, period. I agree with you that algos also operate in most other markets, but I would add that the intensity is just not the same. But hey, you can agree or disagree with me! That's the beauty of debate. The key thing about it I would say is that at some point even if you have an awesome amount of knowledge, you learn something.

[steve46]

Well to return your "serve"...lets be clear...I certainly do not claim to have exclusive access to "the way" to trade...its a big world and there are numerous ways to participate in the markets.

Also I hope never to be too proud to learn something new...one reason I stay with this is that I can often learn new things or find new concepts that serve as a point of departure for my own research.

With respect to high frequency execution..those programs largely exist to obtain what the industry calls a "peekaboo" look at order flow just prior to execution. Those who participate in these activities may deny that, but in reality that is just what they are doing...It requires special data feeds, high speed equipment as you have suggested and co-location. Also it requires a special type of software program to evaluate the data stream and put in place a logic driven basket execution to take advantage of the information obtained. The reason I suggest that these actions have little effect on retail traders is that they are completed in milliseconds and the effect is similar to either a "Liquidnet" pool transaction or "program A" reportable block transaction..The primary difference is that these participants are looking for incremental profits (often taking profit on fractions of a point) not a significant move in price.....and for the most part these activities are buffered amongst the vast volume of both pit executions and automated off site programs...in essence it all blends together...and frankly these transactions have very little effect on intraday market movement.

Finally, one can get a quick look at some of the automated executions by simply putting $TICKI chart in place on your screen (assuming you have Esignal as your data provider)...tomorrow for example you will probably see executions go off at 6:40am and again at 7am. These transactions can be seen whent the reading on the chart goes to 25 or more..

Well I don't want to bore people with too many details...so please do carry on as you were.

Good luck to all in the markets

[TheDude]

If you algo junkies want to get a real hard on, look at:

Unified Latency Management for Financial Markets - Corvil
Complex Event Processing, Event Stream Processing, StreamBase Streaming Platform

While you tug yourselves off, I'm gunna make me some real coin trading lean hogs, corn, soy beans, all the dull boring stuff that only the farmers trade. Candy from a baby springs to mind.....

[Qiman]

I wonder how many hypertraders of the ES actually make money? Any here? In my experience at least, the ES seems to have more stop-running back and forth arbitrage due to how many forces use it for that purpose, at least compared to say the NQ. When I compare the two side by side the NQ is often less herky-jerky. And yet the internet is full of advice as to how to scalp the ES for a point here and there. Scalping noise is a very, very tough game, even with fast computer connections, and if some of these ES scalpers would be much more patient and wait for pullbacks and clearer entries, based on supply and demand, they might be able to ride some nice waves for several points at a time with less chance of getting stopped out. Some trade the ES 20 times a day or more, but with transaction costs and chasing random activity, no wonder so many give up in disgust. Some few out there are brilliant scalpers of the ES, and my hat is off to them. But for most traders trying to make money with this very liquid contract, it might be better to patiently trade the two or three times a day when the probabilities are more clearly in your favor.

[steve46]

Originally Posted by Qiman »

I wonder how many hypertraders of the ES actually make money? Any here? In my experience at least, the ES seems to have more stop-running back and forth arbitrage due to how many forces use it for that purpose, at least compared to say the NQ. When I compare the two side by side the NQ is often less herky-jerky. And yet the internet is full of advice as to how to scalp the ES for a point here and there. Scalping noise is a very, very tough game, even with fast computer connections, and if some of these ES scalpers would be much more patient and wait for pullbacks and clearer entries, based on supply and demand, they might be able to ride some nice waves for several points at a time with less chance of getting stopped out. Some trade the ES 20 times a day or more, but with transaction costs and chasing random activity, no wonder so many give up in disgust. Some few out there are brilliant scalpers of the ES, and my hat is off to them. But for most traders trying to make money with this very liquid contract, it might be better to patiently trade the two or three times a day when the probabilities are more clearly in your favor.

Your point is valid..I think very few people really think about what it takes to profitably scalp any market much less the S&P Futures...unless you have a way to cut costs (all costs including commission) down significantly, it isn't economically feasible...In my opinion, retail traders are drawn to scalping because they cannot tolerate the physical tension associated with holding a position...they think that because they can ring the register a couple of times quickly that
THAT constitutes a viable strategy...it doesn't....to overcome expenses one has to make sure that they manage risk very carefully and on top of that you have to find a way to be bigger when you win (bet sizing) than when you lose.....there is a way to do it but most retail traders don't take the time to learn....so they are doomed from the start...its part of the reason so many fail or quit....and if I may...that is why trade rooms and the poor folks who participate in them....usually end up the same way....with a net loss...there's more to this business than setups....and once a person figures it out they have only a few choices...either learn to manage risk and to bet properly or, go find another hobby...