Level 2 idea

[Ferru]

Is it a viable strategy to offer money on both sides of the spread in a tightly ranging market, and exit ASAP if the market moves against you, taking advantage of the fact that very quiet markets are more likely to remain quiet than suddenly spring into life?

Thanks

Jeff

 

[ivantchourilov]

try it 🙂 generally if you have good brokerage rates, you make money out of this. MM mentality..

 

[Ferru]

try it 🙂 generally if you have good brokerage rates, you make money out of this. MM mentality..

Thanks Ivanchourilov

I'll illustrate my concern with that approach with an analogy.

I toss a coin.

If it comes up heads, I give you a pound. If it comes up tails, we get a computer to generate a random number between 1 and 10, and you give me that number in pounds.

If the coin was unbiased, there's no way you'd take that bet!

But let's say that the coin is biased. If you win (say) 70% of the time, you might come out ahead overall. Or you might not. I don't know...

That is why I'm not convinced that scalping where you simultaneously offer money on both sides of the book works - it offers a limited upside but a more or less unlimited downside.

Can anyone demonstrate that it does offer a long-term edge?

That's not a rhetorical question, btw. I'm writing this post because I want to make money from reverse book scalping, not to knock it! 🙂

Thanks

Jeff

 

[Ross S]

I have no expertise, but I believe that the price is a measure of people's confidence and that confidence is lost more quickly than it is gained (explaining the sawtooth pattern which is common) and so you might consider an unequal backing.

Another idea to consider is the ratio of shares that have gained more than 10% in a single day and those who have lost more than 10% on that day.

I cannot help think that investing against yourself is not sensible! There are always costs / expenses which eat profit. I also think that getting one investment right is difficult, and making the problem more complicated will not help.

These are just my thoughts and I stress again that I do not have the experise to make judgements or recommendations