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RobinHood

What Made You Pick Your Instrument

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I've heard that one should specialize in an instrument or group of instruments which suit ones personality.

 

Right now I'm watching the Hang Seng, Bund/Bobl/Schatz, SPI and sometimes the ES and DAX.

 

I'm not to sure which one "suits my personality" and on what I should specialize or whether scalping is even my style.

 

 

I was curious about those of you who feel you are in your niche,

 

what attracted you to your product/style?

was it the volatility of the instrument, the volume, the order book depth?

 

or did you just decide to stick one instrument and found it began suiting you once you started making money?

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That's a great question.

 

Personally, I started in stocks moved to options and then found futures. From there it was a matter of personal preference. Currently I'm doing most trades on the Stoxx simply b/c commissions are lower and my stops seem to hold better there. Still watching the good ole ES, but I'm getting more bang for my buck on the Stoxx.

 

Once you decide on futures, I think it's a personal thing. The ER2 is known to offer some wild rides while the YM may put others to sleep. The CL is a bucking bronco while bonds can be like watching paint dry... All futures, but all very different animals.

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So given your timezone ... does that mean your trading stoxx during dow times? You are actually trading the tail not the dog?

 

Thats an interesting way of avoiding shakeouts. Clever, if thats what you are doing. How's depth?

 

 

I used to trade Bund and Eurofx but it was in my evening so I started trading HSI when I became aware of it. Back then 190 points was a big day. I liked the trendiness and technical readability. Its also very exciting and the opening times suited me. In August last year some big swinging dicks from Shanghai started trading it and really screwed my pooch. So I gave it up.

 

Now I trade SPI for an hour or so after opening and SPI and STW for the closing two hours of the day. The first hour of SPI gives good technical moves. Then I take lunch. Then the last two hours of both usually offer me a few good pullbacks to take some points.

 

I am expecting volatility in all markets to decline soon (how soon I don't know) and will probably move back to HSI if that happens as SPI and STW will drop to until their daily ranges are too low for me.

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Depth on the fixed income is okay. The book is thick but not really as thick as I remember it when I watched it from the morning session. It indeed can be like watching the paint dry.

 

The reason I'm trading these hours was not related to any strategic thinking on my part. I simply work nightshifts and so my hours can be pretty crazy.

 

Sometimes I will get back home 1am, which is 3pm in CET. I don't know if that makes it easier to trade as I'm missing lots of early bond action, unless there are some important US action or announcements. If I'm not tired I'll go on strong to early morning and watch US markets.

 

When I wake up I catch the Hang Seng & SPI and then go to work (like now).

 

 

I think based on what you guys said I would be choosing to concentrate on fixed income. Good tick size. I can trade it. It is complicated and I have to watch other markets. Sometimes it has moments of violence which are exciting. You can do massive volume when you become proficient. Downside is most of the time it will bore you to death, just seeing it up one tick, down one tick for 5 min.

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Some further thinking today has convinced me that I should actually concentrate on the HSI for the following reasons:

 

 

My shifts are soon going to become permanent night so I will miss the European markets entirely. (If I want to deal poker, then there is nothing I can do about this).

HSI is exciting and one of the markets I seem to be able to get in tune with

 

The downside is that I can only trade it when I turn 21, and that is a problem since sim & real execution difference is apparently huge on the HSI. (I'll be using MHI of coarse).

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So given your timezone ... does that mean your trading stoxx during dow times? You are actually trading the tail not the dog?

 

Thats an interesting way of avoiding shakeouts. Clever, if thats what you are doing. How's depth?

 

The volume and depth on the Stoxx till about Noon EST is really nice. Very thick and liquid.

 

I'm mainly trading the stoxx till Noon EST (if not earlier) and then done for the day.

 

;)

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That's a great question.

 

Personally, I started in stocks moved to options and then found futures. From there it was a matter of personal preference. Currently I'm doing most trades on the Stoxx simply b/c commissions are lower and my stops seem to hold better there. Still watching the good ole ES, but I'm getting more bang for my buck on the Stoxx.

 

Once you decide on futures, I think it's a personal thing. The ER2 is known to offer some wild rides while the YM may put others to sleep. The CL is a bucking bronco while bonds can be like watching paint dry... All futures, but all very different animals.

 

Regarding Stoxx , presume this is the index for the 50 largest companies in Europe,

1. what timeframes to do you employ

2. Also what are your trading hours, as the markets I believe are open for 13hours.

3. Do you find liquidity adequate and if you use market orders, is there much slippage.

4. Are the price moves smooth or erratic and volatile ie. spikey

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I'm currently developing a mechanical system for the DAX. The most important thing when trading the dax is to keep your stops a little wider than u would for a normal market as it is quite volatile. But not too wide of course...:)

 

Also, regarding the stoxx future. Its very liquid, and its possible to make a handsome living by just grabbing one tick a day but sizing up...now the hard part is developing a system that will allow you to do this consistently :)

 

The stoxx and dax tend to move quite closely with each other.

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I'm currently developing a mechanical system for the DAX. The most important thing when trading the dax is to keep your stops a little wider than u would for a normal market as it is quite volatile. But not too wide of course...:)

 

Also, regarding the stoxx future. Its very liquid, and its possible to make a handsome living by just grabbing one tick a day but sizing up...now the hard part is developing a system that will allow you to do this consistently :)

 

The stoxx and dax tend to move quite closely with each other.

 

Recently the average range on 5min Dax bars have been over 20-25pts,

1 tick on stoxx , is that 10euros, doesn't sound much, the cost of commision would dig into that, won't it.

What is the mechanical system based on? ie. price based indicators, vol, support/resistance levels etc.

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I picked the European indexes as they're open outside of business (working) hours in Australia, and they feel more 'technically' stable than the other indexes.

 

Im probably mentally comparing it to the local All Ordinaries, for an intraday timeframe it does all sorts seemingly random things, only 2-4 large moves (if you're lucky) throughout the day.

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When I wake up I catch the Hang Seng & SPI and then go to work (like now).

 

Have you ever checked out mini nikkei instead of hang seng?

While I dream of HAVING to trade ES someday, for my amount of capital I simply see no reason to trade a larger point size than YM. For my style and considering how highly correlated the 2 instruments are, I find no real trading personality difference between the two other than that I can't use an ultra tight stop on ES as far as capital goes like I can on YM.

I don't use limit orders per se but always buy the bid or sell the ask and if I don't get filled oh well, next. 12-14 point hard stop depending on ATR, but that is just incase I get in front of the wrong side of a program. Also, since YM is slower its easier to read the tape so my real stop is usually around 7 or 8 points that I'm taking off and moving on before my hard stop is hit.

6 YM ticks against me is my discretionary eye brow raiser that maybe things aren't working out and I'm ready to bail..the problem with that on ES is that with the tick size and speed/depth your barely even talking 2 ticks as far as trading the same way..pure noise.

Mini Nikkei is the only other instrument that interest me currently because of its tick size like YM and that I could trade all day because of the time zone differences with a nice 4 hour dinner break. I soppose once I'm comfortable enough to quit my job and go pro, that is what my day will look like until I have too much capital that I have to trade ES and the meaning of an ultra tight stop changes, and/or I just don't want to trade all day anymore like I would love to now.

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I started with futures with an eye towards the mini S&P or YM. Mainly because I believed at the time that the "real pros" traded index futures and or interest rate futures (10 year bond). My first actual trade ended up being in currency futures.

 

I was persuaded to believe that the only real edge an off the floor trader has is trend and currencies are some of the best trending markets out there. While I am not trying to convince you of anything, here are some points that go to the OP:

 

CURRENCIES:

 

1. High degree of trend (the trend truly is your friend)

 

2. Respond well to "technical analysis". TA is a broad category to be sure, but it is nice that currencies can be traded so well from a purely technical side.

 

3. Spot Forex offers near 24x7 trading. In truth, the best hours to trade tend to be the London Open and New York Open. New York hours coincide with the S&P futures (RTH) and cash markets and NYSE.

 

4. Liquidity is high in both spot and futures. Volume in futures may be light to some, but I seriously doubt that anybody here can trade at the size that would make that a problem.

 

5. Numerous free data and software options. One can spend nothing or one can spend thousands; it's nice to have such a wide spectrum to choose from. Before some one says, it is possible to get futures data and software free from certain brokers.

 

6. I have a degree(s) in both Economics and International Politics. Not necessarily needed to trade (see 2), but I can tell my parents that the time in school wasn't a complete waste. LOL

 

Anyway, these are many of the reasons I picked the Forex Market. Like I said, not trying to convince anybody of anything.

 

P.S. #7. Related to 2, but deserves mention of its own. The BBs leave such visible tracks in the forex market (VSA).

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for my amount of capital I simply see no reason to trade a larger point size than YM. For my style and considering how highly correlated the 2 instruments are, I find no real trading personality difference between the two other than that I can't use an ultra tight stop on ES as far as capital goes like I can on YM.

 

Do you find that the YM is a bit like flies on the elephant? In the past I have found that sometimes YM run's a bit further then comes back and is generally a bit more 'jittery' being thinner.

 

Bump:

I like the liquidity of Forex.

 

People should be aware that most retail 'traders' don't have access to this liquidity. In fact as most forex brokers are bookies they dont actually have access to any of it!:)

 

Some observations on VJ's points

 

1. High degree of trend (the trend truly is your friend)

 

This is oft quoted and may well be the case. Intraday I see little difference from other instruments.

 

2. Respond well to "technical analysis". TA is a broad category to be sure, but it is nice that currencies can be traded so well from a purely technical side.

 

One thing I have observed is in FX price really respects fib levels. It's pretty much on all time frames and rather uncanny :)

4. Liquidity is high in both spot and futures. Volume in futures may be light to some, but I seriously doubt that anybody here can trade at the size that would make that a problem.

 

Trouble with spot is most retail traders don't have access to this liquidity. Most 'brokers' are in fact bookies.

 

P.S. #7. Related to 2, but deserves mention of its own. The BBs leave such visible tracks in the forex market (VSA).

 

This has been debated ad nauseam however it should be noted that no one publishes spot FX volume data, you can get number of quote changes. Quote changes seem to be a reasonable proxy for volume. If you need this info it narrows the tools and data feeds available to you.

 

Just a few observations. I have only been trading spot FX for about 6 weeks now but found myself drifting back over to the the FTSE for the European morning session.

Edited by BlowFish

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Just a few observations. I have only been trading spot FX for about 6 weeks now but found myself drifting back over to the the FTSE for the European morning session.

 

Say how do you find liquidity in FTSE, do the orders get filled quickly, tried in many years back, found it too spikey, what timeframe do you prefer to trade from. Also do you use London brokers, understand futuresbetting Co. are back in business, provide direct access to the exchange via their trading platform , advantage, no CGT:)

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No problem with liquidity sure its a bit thin and spikey sometimes but I guess thats part of the appeal :) I think you should be fine up to about 10 contracts (though I don't trade that many). I use IB (interactive brokers) and have no issues.

 

I draw S/R from hourly (though sometimes zoom out to 4h and daily if things look too 'busy'). The lines are usually good for weeks I then trade from a 1-5 min chart depending on volatility. Its a feel kind of thing. I do watch a very fast (currently 10 second though have used .5 range or 10tick etc.) fine chart to gauge momentum and try to see if S/R are holding in real time. To be honest 5 min or 3 min / 1h or 4h are kind of academic.

 

If there are no lines nearby I sometimes scalp just off the 1/5min. but trying to pay attention where price is moving from and where it might move to.

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No problem with liquidity sure its a bit thin and spikey sometimes but I guess thats part of the appeal :) I think you should be fine up to about 10 contracts (though I don't trade that many). I use IB (interactive brokers) and have no issues.

 

I draw S/R from hourly (though sometimes zoom out to 4h and daily if things look too 'busy'). The lines are usually good for weeks I then trade from a 1-5 min chart depending on volatility. Its a feel kind of thing. I do watch a very fast (currently 10 second though have used .5 range or 10tick etc.) fine chart to gauge momentum and try to see if S/R are holding in real time. To be honest 5 min or 3 min / 1h or 4h are kind of academic.

 

If there are no lines nearby I sometimes scalp just off the 1/5min. but trying to pay attention where price is moving from and where it might move to.

Thanks, have a look at Stoxx, lots of liquidity,

Looks like you are following a lot of what Dbphoenix teaches, especially the 10sec, 5sec charts to observe the pushpull of supply/demand. Lot it make perfect sense.

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I only trade the S&P e-mini. It has ample liquidity for intraday trading. It also has a great percentage of speculators vis-a-vis hedgers which makes it ideal for taking money from novices.

 

It is also one of the toughest markets to trade due to price oscillation.

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The ES is the most liquid market that I know of (bang for buck), I have devoted my career to it and SPY because of liquidity of those two products. If you can make $ trading these two, you don't need anything else.

SPY trades 42 billion dollars a day currently on average. That's all the liquidity you need. I use the electronic exchanges exclusively (ARCX preferred).

For an intraday, or short term trader, there are plenty of trends and the best part is that you don't have to "wait for the paint to dry".

I'm not saying its easy, personally I blew up a few accounts to get consistent.

 

It's best to trade markets that are moving. Some markets come alive for a while and then die - you can chase these around forever, and if you don't have a solid method for identifying them early, chances are you will get on towards the end.

The good thing about ES / SPY is that there is always action on some time frame, and there is enough liquidity to go to low time frames.

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......It's best to trade markets that are moving. Some markets come alive for a while and then die - you can chase these around forever, and if you don't have a solid method for identifying them early, chances are you will get on towards the end.

...

 

Many would consider the ES as the "gold standard". The market the Big Boys trade. If you can make there, you can make it anywhere. LOL

 

The pro's pro, however, is much more likely to trade whatever is moving at the time. Picture a hobo that wants to go west. He can jump on a train going east, wait for it to slow down, stop, reverse and then pick up speed going west. This is absurd. Why not simply jump on a train already moving west in the first place?

 

With that said, specialization works better for the small retail trader as markets have individual personalities and quirks. There maybe too much information otherwise. As for the moral of our hobo fable, the idea can be applied to movement within a market as well as amongst markets.

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Good points VJ.

 

I think you nailed two important ideas for this thread.

 

1. Searching for markets in motion

 

vs.

 

2. Specializing in a market and being patient waiting for the opportunities.

 

As mentioned earlier, there are considerations like time of day, liquidity, etc.

 

Most of us have figured out a while ago that each instrument has its own "personality" and will behave differently due to manipulations or the methods of the most active participants.

 

For these reasons, it may be just as difficult to move around trying to jump on different trains as it is to be patient in a super-liquid market waiting for the proper set-up.

 

Personally, my evolution as a trader is capitulating in my ability to be patient. I find it too much work to chase around what is moving, since with a liquid market like ES the opportunities will come to you if you can sit patiently.

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Good points VJ.

 

I think you nailed two important ideas for this thread.

 

1. Searching for markets in motion

 

vs.

 

2. Specializing in a market and being patient waiting for the opportunities.

 

As mentioned earlier, there are considerations like time of day, liquidity, etc.

 

Most of us have figured out a while ago that each instrument has its own "personality" and will behave differently due to manipulations or the methods of the most active participants.

 

For these reasons, it may be just as difficult to move around trying to jump on different trains as it is to be patient in a super-liquid market waiting for the proper set-up.

 

Personally, my evolution as a trader is capitulating in my ability to be patient. I find it too much work to chase around what is moving, since with a liquid market like ES the opportunities will come to you if you can sit patiently.

 

Personality, to me its all about personality. I started out in the equities market and slowly moved to equity options. I still trade both of these but I found the ES and YM fit my personality. I like the quick moves and the fast entries and exits.

 

They just fit my personality

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