What a complete and utter pillock

I've been playing about on a little SB account with pairing FTSE and DOW. This afternoon, after a period of relative FTSE weakness against the DOW, I went Long Ftse/short Dow.

Came back from bridge tonight to see how it had gone - and it had!! 20% of the account disappeared because I'd gone long on both. Serves me right for rushing a trade before going out and not checking.

Please kick me round the park for an idiot

jon

20% of an account?! If I lost 20% of my account because I went to play a stupid game liek bridge I'd be tempted to shoot myself, and at the least some heavy flagellation.

Seriously though, I've made mistakes too in terms of entries and size, and even entered the wrong size trade and held it hoping for breakeven. But if you're entering and risking 20% of an account and not even checking before you go out, then you're not taking this game very seriously are you.

barjon said:

Please kick me round the park for an idiot

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barjon said:

I've been playing about on a little SB account with pairing FTSE and DOW. This afternoon, after a period of relative FTSE weakness against the DOW, I went Long Ftse/short Dow.

Came back from bridge tonight to see how it had gone - and it had!! 20% of the account disappeared because I'd gone long on both. Serves me right for rushing a trade before going out and not checking.

Please kick me round the park for an idiot

jon

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2001 A Space Odyssey human error - YouTube

best to always auto trade if possible.. but not so easily done with a SB account.

barjon said:

I've been playing about on a little SB account with pairing FTSE and DOW. This afternoon, after a period of relative FTSE weakness against the DOW, I went Long Ftse/short Dow.

Came back from bridge tonight to see how it had gone - and it had!! 20% of the account disappeared because I'd gone long on both. Serves me right for rushing a trade before going out and not checking.

Please kick me round the park for an idiot

jon

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WOW,...man...How in the hell does that happen? Even if you enter a trade incorrectly as we all have done from time to time you should not lose 20%. Seriously, with a DOW down 2% move and FTSE down 0.5% ...how do you lose 20%? You must have bought WAAY to many shares for your account size. Also, dont you check your trades periodically during the day even if you are doing something else? I trade with mostly EOD data and check in on my trades at least 2-3 times a day and make minor adjustments as needed. Wow,...I think I'd be so pissed at myself that I would not need the public flogging.

Good Luck getting it back.

You stupid boy - YouTube

Interesting trade you intended to place - statistical arbitrage, eh?

Long term, how would you see this panning out on a real account? As a retailer you have higher fees (or spread in SB case) and by implementing this strategy you'll need to make up for that. Also, if this star arb opportunity is for real, are you not competing for quite a small inefficiency with those pesky co-located algo traders.

As for the dumb move. I do something dumb at least once a week. Yesterday I was trying to re-size a window and I accidentally clicked my DOM. Of course, this entered a long trade, I watched it go my way a little and then realised I was short (duh!) and it was actually going against me. I managed to squeeze a ticks profit out of it in the end.

Still - it doesn't make up for that day trade my daughter placed last month when I left the machine on still logged into my IB account.

Please kick me round the park for an idiot

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I wouldn't be so hard on yourself Jon as I am sure many of us have done similar things at various times. What it shows is that you can never be casual about trading and have to have always be diligent.


Paul

DionysusToast said:

Interesting trade you intended to place - statistical arbitrage, eh?

Long term, how would you see this panning out on a real account? As a retailer you have higher fees (or spread in SB case) and by implementing this strategy you'll need to make up for that. Also, if this star arb opportunity is for real, are you not competing for quite a small inefficiency with those pesky co-located algo traders.

As for the dumb move. I do something dumb at least once a week. Yesterday I was trying to re-size a window and I accidentally clicked my DOM. Of course, this entered a long trade, I watched it go my way a little and then realised I was short (duh!) and it was actually going against me. I managed to squeeze a ticks profit out of it in the end.

Still - it doesn't make up for that day trade my daughter placed last month when I left the machine on still logged into my IB account.

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DT

The "inefficiency" (although it's not really that) is not as small as you might think. The FTSE has periods of relative strength (goes up better than 1 points for each DOW 2 points or down less than 1 point for each DOW 2 points) followed by periods of relative weakness (goes up less than 1 point for each DOW 2 points or down more than 1 point for each DOW 2 points).

The chart below is based on daily closes (although it shows cumulative strength/weakness until at least a 10 point "reversal") which will give you a clue . You'll see the same thing happening intraday.

The big advantage is that you don't have to be right on direction (which was my inadvertent downfall) just relative performance. So I was not risking as much as shakone and eegozi might think if I'd entered the trades correctly.

jon

Jon,
Yeah, I agree with Paul - don't be so hard on yourself!

Like DT, I do something pretty stupid at least once a week. Favorite mishaps include:
1. Forgetting to cancel old stop orders (which are then triggered when I'm not watching).
2. Going long instead of short (and vice versa).
3. Adding to an open position instead of closing part or all of it (usually when the trade is going against me).

As for the 20% loss - you've got some serious work ahead of you if you're gonna get anywhere near my personal best of 70% on a single trade!

Tim.

barjon said:

DT

The "inefficiency" (although it's not really that) is not as small as you might think. The FTSE has periods of relative strength (goes up better than 1 points for each DOW 2 points or down less than 1 point for each DOW 2 points) followed by periods of relative weakness (goes up less than 1 point for each DOW 2 points or down more than 1 point for each DOW 2 points).

The chart below is based on daily closes (although it shows cumulative strength/weakness until at least a 10 point "reversal") which will give you a clue . You'll see the same thing happening intraday.

The big advantage is that you don't have to be right on direction (which was my inadvertent downfall) just relative performance. So I was not risking as much as shakone and eegozi might think if I'd entered the trades correctly.

Click to expand...

ps: and here's one showing the cumulative relative strength weakness this year although it's not up to date. You'll see that the FTSE spent the first few months relatively strong and at it's best was 300 points above where it should have been had it just kept pace with the DOW.

It then turned weak and at it's worst was 500 points below where it should have been had it kept pace with DOW.

jon

Jon

In correlated markets, this is exactly what an inefficiency is.

If it's not an inefficiency and the markets are not strongly correlated, this strategy could give you the trading equivalent of a "spit roast" - where you will get hit both ends.

The advantage of not being having to chose direction is not really an advantage unless you can overcome the additional fees & the lower return per trade.

This is why stat arb is usually not chosen by retailers, we pay $3-4 per r/t on a futures contract and pros pay 40c. Add in the fact that stat arb is usually done by fast computers, the edge usually ends up pretty small - esp on things like E-mini vs S&P500 stocks.

If you've found an easy way to arb these 2 markets, then you have to wonder why that opportunity (aka inefficiency) exists and remains unexploited.

Just a thought.

DT

DionysusToast said:

If you've found an easy way to arb these 2 markets, then you have to wonder why that opportunity (aka inefficiency) exists and remains unexploited.

Just a thought.

DT

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Market opening hours? Big orders? Battling algos?

barjon said:

I've been playing about on a little SB account with pairing FTSE and DOW. This afternoon, after a period of relative FTSE weakness against the DOW, I went Long Ftse/short Dow.

Came back from bridge tonight to see how it had gone - and it had!! 20% of the account disappeared because I'd gone long on both. Serves me right for rushing a trade before going out and not checking.

Please kick me round the park for an idiot

jon

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Jon, you surprised me for a moment. I thought that your, normally, urbane nature had lost its cool against someone else! Naturally, I had to read further to find out who the unfortunate was.

It was only you. That happens to all of us.

DionysusToast said:

Jon

In correlated markets, this is exactly what an inefficiency is.

If it's not an inefficiency and the markets are not strongly correlated, this strategy could give you the trading equivalent of a "spit roast" - where you will get hit both ends.

The advantage of not being having to chose direction is not really an advantage unless you can overcome the additional fees & the lower return per trade.

This is why stat arb is usually not chosen by retailers, we pay $3-4 per r/t on a futures contract and pros pay 40c. Add in the fact that stat arb is usually done by fast computers, the edge usually ends up pretty small - esp on things like E-mini vs S&P500 stocks.

If you've found an easy way to arb these 2 markets, then you have to wonder why that opportunity (aka inefficiency) exists and remains unexploited.

Just a thought.

DT

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DT

ok "inefficiency" it is

I'm doing this via SB so the cost is in the spreads which are variable depending on when you trade. At best (when both markets are open) spread can be 1 point on each with some providers.

An example:

FTSE closed yesterday at 5437 when DOW quote was 11511

This morning FTSE open with my SB was 5385 and DOW quote 11340

So DOW was down 171 which (at 1 FTSE point for 2 DOW points) means that FTSE should have opened down 85 points (171/2) at 5352

Thus FTSE was 33 points strong at the open (5385 - 5352)

I went short FTSE and long DOW on the presumption that FTSE would seek to correct that "inefficiency". I didn't enter straight away (come to that later) but for the sake of not confusing the example the entries would have been FTSE short 5384.5 (1 point spread) and DOW long 11342 (4 point spread).

At 9am FTSE was 5366 (- 19 from open) and DOW quote 11322 ( - 18). Thus FTSE was weak by 10 points at that stage - ie: had it kept pace with DOW it would only have been - 9 ( DOW - 18/2). The trades would have look like this had you closed at 9am:

DOW long £1 = - £22 ( - 18 + spread)
FTSE short £2 = + £36 ( + 19 - spread)

Net + £14 (multiply that by whatever stakes you are using)

For my actual trades I was in at 5383.3 and 11345 - they're still running and about a net 6 points to the good as I write.

jon

Nice to know moderators are human

barjon said:

..........For my actual trades I was in at 5383.3 and 11345 - they're still running and about a net 6 points to the good as I write.....

jon

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scratched them now for nothing - that hasn't made any dent in the loss

Jon, if only life had a 'Back' button.

tomorton said:

Jon, if only life had a 'Back' button.

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I probably would of crashed it by spamming backspace.

try to play the Dax Vs ftse , more interesting ...