NuclearPhynance Archive

Chigs,



As you can see this is a difficult game.  Much of what has been discussed explains your options very well.  To me it comes down to personality.  You could throw yourself into the game, test your skills mano-a-mano in the discretionary trading realm, and realize that you can hack it or can't.  This could be a quick process if you are honest with yourself in assessing your progress.  Conversely your could take a very scientific approach to the markets and attempt to create a profitable trading system.  If you are very stringent in what you are willing to trade this process could take a very very long time.  When tested under serious rigor you would be amazed at how much doesn't work systematically.  In my estimation it is a needle in a haystack proposition.  I can only wish you less tears than most endure in this endeavor.  The good news is that for the few that can make it, the rewards abound.



I have a systematic bent which is both a blessing and a curse.  I believe long term it will be a blessing.  I'll give you an anology from tennis contained in Neiderhoffer's book Practical Speculation that summarizes this view.

"All great players will tell you that the thing they hate most is when an inferior opponent plays a risky game - creating confrontation, going for broke, going for the lines on every shot.  That is the only way the better player can lose."

Now I ask you what game do you want to be forced to play?  Do you want to be the young player forced to go for broke or the seasoned veteran relying on his experience and edge to win?



In the end its all about the bucks though.  If you go the systematic route you might look at discretionary traders making money with a critical eye.  Your scientific methods may give you some comfort that you are doing things the "right" way.  You may even comfort yourself with hubris by telling yourself how smart you are.  Well I've found that you can't spend "smart".  Respect those making honest money in the markets whether discretionary or systematic.



Lastly, you said you might be looking for TAQ data.  I have a contact: [url=/beta/Show%20Post.aspx?PostIDKey=5615]https://nuclearphynance.com/beta/Show%20Post.aspx?PostIDKey=5615[/url]  That and potentially other tick data.  In fairness you may want to check out the free CBOT data mentioned in the thread when it rolls out.  Contact me at that email address if you just want to talk too.

absolutely - I have great respect for anyone who can survive in this game. I'm not fooling myself; I am quite prepared to accept that I don't have what it takes, and I don't think that I am smart - sometimes it is difficult to spot who is smart and who is simply well prepared. I try to prepare myself :-)



I'll be spending the next few months doing my homework, and when contract renewal time comes, I'll make a decision of whether to continue doing the monkey work for someone else (money's not too bad but I really question some of the things I am asked to code up).



I'll be in touch regarding tick data.



Thanks,

Chigs

> I have seen several people say paper trading is bad. I don't disagree, but I think it

> would be helpful to explain why. Is it:

>

> Psychology 1 -- you can't know how you'd really act if it was really money

>

> Psychology 2 -- gives you a false sense of security

>

> Transaction costs -- paper traders may tend to ignore/underestimate these

>

> Market impact of your trades -- can't really model this if you are paper trading

>

> Other -- ???

>



My view is that when trading for real you will need to stay `in form' and not be

unbalanced by what goes on around you. Managing yourself, that is your state

of mind is a major issue. A winning trade can be just a destabilising as a losing

trade, and becoming destabilished (without realising it) for me is the major source of errors.

For example, if I realise I am diverging from what I consider to being `in form',

I will close all positions and wait a bit before entering the market again.



The thing will leverage and capital etc is not only about what you want to

make but also want level of risk you feel happy with. For me, I am very happy

with deviations of $2,000 a day, $6,000+ a day for long periods will destabilise

me...

good point. For myself, I have found it difficult to stay out of play, especially when there was a lot going on - and that was part of my previous downfall, getting drawn into deals without doing my homework first. Sometimes, things paid off quite well - and this was ok. I was channel trading a bunch of stocks, and it was fairly easy picking up a few % here and there - this was on blue chips - it's not that hard to make money in a bull market. And then I got drawn into a high risk stock which quickly rose and took a sudden dive - and foolishly i bet a lot on that one - it went up ~45% in 15 mins with good volume. I bought that one on rumour of takeover and it had very bad fundamentals. Plumetted by a huge amount when it was announced that no such talks were in place. Expensive way of learning - wiped out <10% of capital but pissed me so much that I decided best to continue coding/learning for a few years :-)



I'm not sure what deviations I would feel comfortable with at the moment.

there has been a lot of good stuff said so far and i'm probably getting involved after much of the interest in the thread has disapated but i have a few comments about market-making, particularly in options.



if you don't have a great amount of capital this can be lucrative. For example in the bund/bobl/schatz structures you can run a credible operation with about 350k (pounds) and get an annualized return in triple figures. this is because there are no long dated options to increase margins, no otc stuff trades and all the software and hardware can be bought off the shelf. further, the counter parties are often trading direction rather than vol so they are less price sensitive than in equity options.



however there are problems. the market is open 11 hours a day and you really need experience (we have two traders with about 5 years each). more generally market making is a different game now it isn't pit based. in the old days being a nice guy and holding up the same number of fingers as the good traders was adequate (actually this is a very good strategy if you can ignore the ego pain). now it often isn't obvious what the correct price to quote is. this is where experience comes in. Quadrature once said that a market maker earns the spread. this is crap. a market maker has AN OPPORTUNITY to earn the spread, but there is no rule that enforces this.



market making is a strategy, not a guarantee.