[86834]

Just because one person can't do something doesn't mean another can't and vice versa.

Neuro-linguistic programming

[Hlm]

Originally Posted by 86834 »

Neuro-linguistic programming

That's so 1980's.

[smwinc]

Originally Posted by Hlm »

Now going back to the original topic of this thread. Yes, it's common knowledge that lots of money is flowing around news announcements. But the question is, do you need anything that is not in a chart to make money. The answer is an obvious no to me. Going back to the whole news event concept...there is no difference.

Hlm how you doing . .

I'm not in the business of being right or wrong, or to be a mentor to new traders, etc etc. Exactly as I just said, I'm just saying my experiences.

Aside from the mental aspect of using size, and working out the psychological reasons of when and why you should use large size, there are practical reasons to think about.

When you trade large size, you have an impact on the market you are trading. It is that simple. It has become worse since the markets have thinned out a lot lately.

The other main reason traders don't scale their size up in a linear fashion is because of the problems you face.

In the eurostoxx, stacks of traders used to sit there with 100 - 200 lots on every few prices - the second they were hit they would place an opposing order 1 tick up/down to take a tick, just making money on the 'two way' price action. Over time the market started to REACT to this trading style. Rather than bounce off the prices and flick back and forth bid/offer/bid/offer, traders clip the entire 200+ bid and send it 200 offer, knowing that someone out there is now probably 200 long offside. They end up covering, pushing the market down another price, often into the take profit order of the guy who clipped the bid and sent it offered in the first place.

The market changes & reacts to large size orders. Liquidity is becoming more and more of a valuable commodity. For a large trader, you need "something" to clip into.

In plenty of markets, the traders are well aware of that. Traders get greedy and see a 300 lot offer at the high. Someone out there is thinking "If I clip that the market will surely bust the high and go a few ticks, letting me take a few ticks profit on 300 lots".

Sounds great. What happens most of the time these days is algorythms are in place that basically program two scenario's, one being: "if greater than or equal to 50% of my offer order of 300 lots is taken, sell 10 x 30 lots at market as fast as possible."

So me the trader clips 200 out of the 300 lot, and the moment I clip it, someone furiously sells the market down a few ticks. Now every man and his dog knows I'm 200 long at the high and 2 ticks offside - the market will then push down and try and squeeze me out.

Again - your action has CAUSED the market movement. Everyone looking at the chart goes "oh, double top, easy sell". Yes, it is an easy sell now, because your selling it down to get me who is 200 long out.

The second scenario often writen into the algo is "OR if greater than or equal to 50% of my offer order is placed in front of me (i.e. traders leaning on the size to sell in front of it) buy at market and simultaneously pull my offer."

Me the trader, rather than thinking of buying it through the high, decides to put a 200 lot offer right infront of the 300 lot, thinking I'm only risking one tick, because I can get out on it if I need to. I lean on him, and the second I do he clips me putting me 200 short , pulls his 300 and sends it bid at the high. Unless I have balls of steel, I end up clipping out at market, taking a loss.

The key point I'm trying to make in all of these situations is in your 'every day' trading the market REACTS to your large size orders. Often, the patterns and setups on the chart are caused from trigger-happy traders trying to get their size off and getting ripped.

So what's the big difference with fundmental news?

Same scenario, 300 lot offer at the high - me the trader eyeing it offer contemplating clipping it. Now (imagine) Goldman comes out saying its got 10 times more exposure to Maldoff than anyone thought. Now I sell 200 at market, leaning on the 300 lot. Yes, the bot might try and rip me through the high, but the guy is WRONG this time - I know there will be thousands of other traders looking to sell the Index, smash the goldman stock, probably smash a few other banks on the anticipation they have exposure, etc.

I have the conviction to hold the short now.

Plenty of people out there will think I am making this way too complicated, over analysing, that it still comes down to S&R levels and taking your trades, etc.

When you are trading off a chart, you are generally trading a formation, let's call it formation "A". The problem tends to be when you clip in with size, it can change the formation from being formation "A" to being formation "B" - all of a sudden you don't want your trade anymore.

This is just what I see, and my experiences. Perhaps it truely is something that you probably wouldn't believe until you try it.

[Hlm]

I see exactly where you are coming from smwinc and I respect your thoughts and experiences. It just comes down to what your actual edge/style/strategy is. I trade multiple time frames from a few points (we'll assume ES in this case) to swing trading. Because of the fractal nature of the market it's all the same pattern and I can adjust size accordingly to the time frame I am trading. Except for maybe my smallest time frame, a few ticks here or there is not going to make a difference...and several points on the larger time frames is acceptable. I also use no volume analysis and everything is dynamic so there are dozens of highly liquid markets that I can trade in. For many people, depending on their strategy, scaling up might be difficult and unrealistic like you explained. However, not all technical strategies and money management are built equal. For example...from how I have seen you trade, our styles are completely different. While you are constantly scaling in and out and watching the DOM for places to lean and grab ticks, I enter full position on pullbacks with a set stop and estimated targets in place. Neither is necessarily better than the other, just different. But prop shops do have a tendency to pump volume and focus on pulling ticks out of the market which is completely different to what my, and many pure chart readers I know have their strategies based around. If ones strategy is based on looking at what's stacked up in the DOM and where they can lean on a tick basis, then yes...size matters and fundamental news can help you. But personally I find that too time consuming.

Happy Trading.

[smwinc]

Originally Posted by Hlm »

Happy Trading.

You too chief, let's pray for an '09 that's somewhat similar to '08

Cheers

[atto]

Ain't that the truth.

Thanks for the clear explanation of how you'd trade using fundamentals. Like Hlm said, it does boil down to style for something like that, as it's oranges to refrigerators type comparisons. I think several people would benefit if one of you prop guys starts a thread on it (and hopefully we can get this one back to chart analysis).

[86834]

Originally Posted by smwinc »

Hlm how you doing . .

I'm not in the business of being right or wrong, or to be a mentor to new traders, etc etc. Exactly as I just said, I'm just saying my experiences.

Aside from the mental aspect of using size, and working out the psychological reasons of when and why you should use large size, there are practical reasons to think about.

When you trade large size, you have an impact on the market you are trading. It is that simple. It has become worse since the markets have thinned out a lot lately.

The other main reason traders don't scale their size up in a linear fashion is because of the problems you face.

In the eurostoxx, stacks of traders used to sit there with 100 - 200 lots on every few prices - the second they were hit they would place an opposing order 1 tick up/down to take a tick, just making money on the 'two way' price action. Over time the market started to REACT to this trading style. Rather than bounce off the prices and flick back and forth bid/offer/bid/offer, traders clip the entire 200+ bid and send it 200 offer, knowing that someone out there is now probably 200 long offside. They end up covering, pushing the market down another price, often into the take profit order of the guy who clipped the bid and sent it offered in the first place.

The market changes & reacts to large size orders. Liquidity is becoming more and more of a valuable commodity. For a large trader, you need "something" to clip into.

In plenty of markets, the traders are well aware of that. Traders get greedy and see a 300 lot offer at the high. Someone out there is thinking "If I clip that the market will surely bust the high and go a few ticks, letting me take a few ticks profit on 300 lots".

Sounds great. What happens most of the time these days is algorythms are in place that basically program two scenario's, one being: "if greater than or equal to 50% of my offer order of 300 lots is taken, sell 10 x 30 lots at market as fast as possible."

So me the trader clips 200 out of the 300 lot, and the moment I clip it, someone furiously sells the market down a few ticks. Now every man and his dog knows I'm 200 long at the high and 2 ticks offside - the market will then push down and try and squeeze me out.

Again - your action has CAUSED the market movement. Everyone looking at the chart goes "oh, double top, easy sell". Yes, it is an easy sell now, because your selling it down to get me who is 200 long out.

The second scenario often writen into the algo is "OR if greater than or equal to 50% of my offer order is placed in front of me (i.e. traders leaning on the size to sell in front of it) buy at market and simultaneously pull my offer."

Me the trader, rather than thinking of buying it through the high, decides to put a 200 lot offer right infront of the 300 lot, thinking I'm only risking one tick, because I can get out on it if I need to. I lean on him, and the second I do he clips me putting me 200 short , pulls his 300 and sends it bid at the high. Unless I have balls of steel, I end up clipping out at market, taking a loss.

The key point I'm trying to make in all of these situations is in your 'every day' trading the market REACTS to your large size orders. Often, the patterns and setups on the chart are caused from trigger-happy traders trying to get their size off and getting ripped.

So what's the big difference with fundmental news?

Same scenario, 300 lot offer at the high - me the trader eyeing it offer contemplating clipping it. Now (imagine) Goldman comes out saying its got 10 times more exposure to Maldoff than anyone thought. Now I sell 200 at market, leaning on the 300 lot. Yes, the bot might try and rip me through the high, but the guy is WRONG this time - I know there will be thousands of other traders looking to sell the Index, smash the goldman stock, probably smash a few other banks on the anticipation they have exposure, etc.

I have the conviction to hold the short now.

Plenty of people out there will think I am making this way too complicated, over analysing, that it still comes down to S&R levels and taking your trades, etc.

When you are trading off a chart, you are generally trading a formation, let's call it formation "A". The problem tends to be when you clip in with size, it can change the formation from being formation "A" to being formation "B" - all of a sudden you don't want your trade anymore.

This is just what I see, and my experiences. Perhaps it truely is something that you probably wouldn't believe until you try it.

top post mate, you explained it a lot better than what i did lol

i remember when i first started learning and was in my training period, i took what my trading buddy said to me about watching how prices trade completely the wrong way, and went through this little phase of trying to lean on large bids/offers. I soon learnt my lesson on that lol...

What smwinc has said (very well) was what i was trying put across (very badly) when i said your trading will only go so far (in my opinion), because trading a 5 lot is completely different to trading in multiples of 100lots. It's not just a case of seeing your support level and buying 300lots. Developing a nautral feel for the market, understanding orderflow on the book, and understanding the fundamentals of the market your trading, inter linked market relationships and so on is (in my opinion and in my experience) essential.

As for liquidity... tell me about it... the good times are behind is now. Used to be so easy - the schatz went bid 5 ticks so you went bid on the bund and got cash back

Boost

[Hlm]

More power to you scalpers...heck, it's what allows me to get good fills . However, after your last comment 86834 I am starting to get an idea where you may be coming from. The trading style that most prop firms use is very micro in nature for actual execution. I am not quite sure at where they get their longer term bias from since I have never actually worked for one. You had mentioned Market Profile but that is still only on a daily basis and by the default settings it is still limited do it's strict start and stop times. This could be the reason as to why you don't believe the rest is within the charts. For example volume, I personally don't watch it because I constantly monitor the natural fractal swings of the market and their current stage within the cycle. For my strategy viewing both is not needed and volume is not as detailed with it's information in comparison (again, my strategy). Of course this doesn't mean it's better than those that use volume. It depends on what they are trying to get out of it and like always the bottom line...PnL. In my opinion fundamentals in a open liquid enviroment is no different. Maybe that gives you a better idea to where I am coming from.