Best Thread Other Side of the Screen

[barjon]

Jon its not about it being tax free/dealing with a bookie etc imo. Its more to do with beliefs about what the 'real' market is.
Whether I bet via futures, cfd, sb. It all becomes very 'real' when im taking one.
Im terming everything that isnt exchange traded as OTC/cash, whatever, including sb (please anyone correct me if you think me wrong). The OP iirc says he doesnt work for an sb, he works for a outfit that offers CFDs (OTC) and futures.
Id like to know (because I dont currently know) how the OPs outfit forms their price on anything they offer other than futures. Imo, the most qualified person to answer that question on this thread is the OP, bearing in mind its his job, that he does x days a week, x weeks a year.

Darktone, you can tie yourself in knots with all this

The most pertinent point you make is that whatever platform you're playing on is the real one for you. All the OTCs have their own algorithms fed in some shape or form from whats happening in the exchange markets or the big players where there is no such market. It follows that they can tinker with those algorithms to their own advantage if they are so minded. Some do - and have been caught at it - but the reputable and regulated ones have to be reasonably straight.

Anyway, it's not as if the "real" market is as pure as the driven snow, is it?

I still think it's mainly a red herring. Most people lose their shirts because they are bad traders, not because they have been shafted by their brokers.

 

[darktone]

They don't offer futures , they offer CFDs on Futures , and they dont offer CFDs on cash indices , which means they are MM not a broker , thats why they don't hedge every bet and they dont have 2 , nothing wrong with that , it would make more sense if he mentions his firm name

I thought from this they did.

"I got a couple of other questions when you have time.
1) Why do non DMA brokers generally dislike scalpers?

Hi Darktone,
1) It could be a combination of things. We offer both, but the allure of a normal client over one we have to place on DMA is that there are greater opportunities to make money from clients who are on our book that we can manually hedge. Making money from DMA requires large volumes per day. Another reason is that often clients demand low spreads and no comms but want to scalp, trying to take 2 pips every time. This is the reason why on DMA you are free to do it, but comms usually negate an 'easy' pickings.

Sorry, im back to ShutinTheFUp, promise, kinda

 

[darktone]

Darktone, you can tie yourself in knots with all this

The most pertinent point you make is that whatever platform you're playing on is the real one for you. All the OTCs have their own algorithms fed in some shape or form from whats happening in the exchange markets or the big players where there is no such market. It follows that they can tinker with those algorithms to their own advantage if they are so minded. Some do - and have been caught at it - but the reputable and regulated ones have to be reasonably straight.

Anyway, it's not as if the "real" market is as pure as the driven snow, is it?

I still think it's mainly a red herring. Most people lose their shirts because they are bad traders, not because they have been shafted by their brokers.

Can agree with all of that Jon. Esp the 'bad traders' bit.
I just have an inbuilt desire to understand how things work, its torment!

 

[tar]

I still think it's mainly a red herring. Most people lose their shirts because they are bad traders, not because they have been shafted by their brokers.

Bad trading ? Yes it may accelerate the process but i thought the main reason for losing is : A gambler with finite wealth, playing a fair game (that is, each bet has expected value zero to both sides) will eventually go broke against an opponent with infinite wealth.

http://en.wikipedia.org/wiki/Gambler's_ruin

 

[Stargunner]

How do SB firms feel about opening a buy and sell on a stock at the same time? The idea being to close the profitable position, then wait for the trend to end and close the other with minimal loss or break even, maybe even in profit too. I know the indices are so volatile you possibly couldn't open both positions fast enough, but on stocks this isn't a real problem.

Another idea would be to close one when the trend after a particular event has been established and keep open the profitable one.

 

[peakoil]

@tar - the most telling part of that 'gambler's ruin' definition is "expected value zero..."

Surely the minority, i.e., winners (viz. those who won't necessarily face 'gambler's ruin) won't OTOH place a bet without its ultimately being within a far greater frequency of +ev bets and will have no difficulty in cutting their losses long before they become damaging, thus giving himself repeated room for recovery. And repeated room for recovery = repeated distancing from 'gambler's ruin'.

The main (...packaged, wrapped with bells on) reason for repeatedly losing at spread betting remains poor timing, poor planning, impatience and/or frequent recklessness and a misuse or overall misunderstanding of leverage. AKA the ingredients for 'gambler's ruin' in this game.

 

[tar]

@tar - the most telling part of that 'gambler's ruin' definition is "expected value zero..."

Surely the minority, i.e., winners (viz. those who won't necessarily face 'gambler's ruin) won't OTOH place a bet without its ultimately being within a far greater frequency of +ev bets and will have no difficulty in cutting their losses long before they become damaging, thus giving himself repeated room for recovery. And repeated room for recovery = repeated distancing from 'gambler's ruin'.

The main (...packaged, wrapped with bells on) reason for repeatedly losing at spread betting remains poor timing, poor planning, impatience and/or frequent recklessness and a misuse or overall misunderstanding of leverage. AKA the ingredients for 'gambler's ruin' in this game.

Well trading is a negative sum game because of spreads and costs . I don't want to change the thread's topic , but when you cut losses short you still are going to have consecutive losses or a prolonged period of severe DD which leads to an account ruin or staying underwater = unprofitable .

 

[peakoil]

It's interesting that you argue trading is a negative sum game as opposed to the more usually understood zero sum game. Costs are just part of life, and all forms of trading include a 'spread' of or in some form, or fashion, so I would still, with no disrespect to you at all, choose the latter explanation/thesis.

 

[tar]

It's interesting that you argue trading is a negative sum game as opposed to the more usually understood zero sum game. Costs are just part of life, and all forms of trading include a 'spread' of or in some form, or fashion, so I would still, with no disrespect to you at all, choose the latter explanation/thesis.

It is a negative sum game for the the trader as an individual , however it is a zero sum game for all traders as a group cuz what you pay in spread and commissions will go to someone's pocket . And if you're a MM or a local you can earn the spread and pay just a fraction of that to the exchange "positive sum game" .

Check the last few pages in this PDF :

http://www-bcf.usc.edu/~lharris/ACROBAT/Zerosum.pdf

Sorry to the OP .

 

[PieterSteidelmayer]

First thread I have read since joining this site and if this is typical of the quality of content generally, I am annoyed I did not join sooner. Quite excellent.

Even if those on the other ends of our trades could conspire to move these markets to capture our risk on aggregate, it would not be in their financial interests to do so; the proverbial pennies in front of steam-rollers. Perhaps some off shore SB companies quoting synthetic prices could employ such tactics or even those on shore on an occasional basis, but their primary income is from the spread they take from the roughly equal numbers of clients in opposition to each other and hedge any delta when it exceeds limits. I like the A book and B book scenario; it sounds just like real life.

From my own experiences I have found placing stops at or close to the standard technical support and resistance levels is counterproductive in the long term as they are typically too close to price given the daily ranges when trading intraday.

Providing you are correct on the directional bias of an instrument, a wider stop will allow you to enter into profit at some point more often than not. Wider stops will mean smaller position sizes and taking profits at fractions of the risk employed does not offer itself superficially as an attractive strategy, but all you are really trading is definite full size losses with the occasional large win and eventual ruin for significantly higher win ratio but for small relative amounts and a gradually growing account.

This argument probably belongs on a thread devoted to risk and reward and would hopefully lay to rest one and for all the misguided and largely futile attempt to structure all trades to capture multiples of risk; it doesn’t happen in any financial undertaking and trading is no different. You don’t invest $100 in opening a coffee shop and expect to make $500 day every day from day one. You invest $750,000 in a coffee shop and your business model suggest you’ll make 18% profits on that starting in in year 2, 24% in year three building to an estimated maximum of 34% in year three and onward. A good return, eventually. But a return at fractions of the initial risk employed. That is in my view a perspective that many traders would perhaps benefit from considering. Home runs are rare, always welcome but rare. If I can get a return of 15% of my risk on 80% of my trades and lose a similar amount on the other 20% I am happy. Having a wider stop doesn’t mean you have to let it be taken, but if my trade goes against me by one or even two technical support/resistance levels, that’s typically just 15% of my risk. For most traders, that first level takes their full 100% risk.

 

[peakoil]

It is a negative sum game for the the trader as an individual , however it is a zero sum game for all traders as a group cuz what you pay in spread and commissions will go to someone's pocket . And if you're a MM or a local you can earn the spread and pay just a fraction of that to the exchange "positive sum game" .

Check the last few pages in this PDF :

http://www-bcf.usc.edu/~lharris/ACROBAT/Zerosum.pdf

Sorry to the OP .

Firstly, greetings PieterSteidelmayer. Hope you enjoy the site as much as most of us do.

@tar, as you might suspect, alas it's admittedly been some years, but still I'm not exactly new to game theory, nonetheless I trust your link will be beneficial to those who are. We will agree that trading is zero sum for the group as a whole then. I agree too with your argument of its being negative sum (or -EV) for the losing trader. When it comes to the winning trader... let's just say, that's where I beg to differ with your point, partly for the reasons given. Anyway, I'm happy to agree to disagree on that moot point and leave it there for now. Cheers.

 

[SpreadBeta]

It is a negative sum game for the the trader as an individual , however it is a zero sum game for all traders as a group cuz what you pay in spread and commissions will go to someone's pocket . And if you're a MM or a local you can earn the spread and pay just a fraction of that to the exchange "positive sum game" . .

Tar, surly you mean it's a negative sum game for the Average trader, as shown by the 80-90% of traders loose statistic.

However as one of the individual traders main advantages over "institutional" money/traders is that they don't HAVE to trade until the conditions are in their favor. (So the trader has a positive expectancy, based on the system etc that are trading after costs).

Personally, I have found that firstly waiting until the conditions are right and then secondly sitting on your hands until your exit conditions are fully met before exiting the trade one of the hardest but most profitable lessons to learn.

Anyway great thread, one of the most interesting I have seen for a while on the forum...

 

[tar]

pssst LLSS said he estimated that 80-90% lost in *his* firm, but as I've previously argued till blue in the face, the figure which both the Economist (nov 2013) & the UK gov backed money advice service (among others) state as being correct is that 75% lose. Sure... it's only 5% from the top of LLSS's estimate, but that difference still makes the difference between saying "1 in 5" win and "1 in 4" win - i.e., similar to the same success/failure rate as new business startups face.

It varies between brokers , i recall Simon "CapitalSpreads" said something around 80% . That being said consistency is something else , so these numbers may be irrelevant .

http://forexmagnates.com/exclusive-...ility-report-ib-1-again-while-oanda-slipping/

 

[peakoil]

It is indeed 80% message deleted as I was bored with it lol

 

[VielGeld]

Some time back you were trading the Asian session in the Live Calls thread. We had some nice moves on data announcements. Are you still trading during that time?

Peter

No, sadly. I've moved on to indices since -- SP500 mostly. I find they trend more nicely than FX, though I'm not averse to taking a trade there if it looks good.

Though specifically speaking of trading news, I don't think I'd have any preference for the underlying. You can more or less expect violent reactions whatever it is you choose to trade.

 

[barjon]

.............It is a negative sum game for the the trader as an individual............

Yes, because of the spread you will always win less than you would lose given an identical movement in price.

Anyone who doubts the draining effect of spread on their account, just calculate the following simplistic and exaggerated example:

Entry point: mid price 100 - bid 99 offer 101
Exit point: mid price 110 - bid 109 offer 111

Long you would have made? Short you would have lost?

Now say you made this trade 100 times, being on the right side for 50 and offside for 50. How much is your account down?

 

[Splitlink]

I do not understand how many posters who trade dozens of times a week have not transferred their attitude from "taking a punt" mode to "running a business" mode, because the latter is what it is. Anyone who is running any kind of business, at all, must have a plan to calculate his expenses and trading can be very light on overheads in comparison to office rent, machinery maintenance and replacement, labour, etc. Anyone who thinks that trading is going to have no overheads, at all, is living in cloud cuckoo land. The spread is a busuiness overhead, as is computer cost, electricity, etc. Most professionals take more modest profits than many realise because they cannot take the risk of not covering costs.

 

[darktone]

I dont wana go to far OT but im interested to see how this would be viewed. Re the zero sum thing (ive not payed it much mind so please excuse my ignorance)
Would this example be considered zero sum?:-

10 players are trading between eachother on the price of 'X'. The market is open only to them (they can be the only participants), there are no costs to keep things simple and they bid and offer over their own exchange.None of the players can withdraw or deposit additional funds, they all had an equal start of £100 (so the total start size of the pool is 1000) and are of the same level in that they all regularly just churn their accounts.
They are all equal with the exception of one of them, who has a special privilege.
This player has a magic button that can reset his account to 10% of the total poo (his equal share)l whenever his account draws down to a flat balance which equals 5% of the total pool ( half his equal share).
The game goes on with players churning their accounts but the total pool of money ever increasing because of the privileged players occasional magic resets.

 

[sonofcablemonster]

I dont wana go to far OT but im interested to see how this would be viewed. Re the zero sum thing (ive not payed it much mind so please excuse my ignorance)
Would this example be considered zero sum?:-

10 players are trading between eachother on the price of 'X'. The market is open only to them (they can be the only participants), there are no costs to keep things simple and they bid and offer over their own exchange.None of the players can withdraw or deposit additional funds, they all had an equal start of £100 (so the total start size of the pool is 1000) and are of the same level in that they all regularly just churn their accounts.
They are all equal with the exception of one of them, who has a special privilege.
This player has a magic button that can reset his account to 10% of the total poo (his equal share)l whenever his account draws down to a flat balance which equals 5% of the total pool ( half his equal share).
The game goes on with players churning their accounts but the total pool of money ever increasing because of the privileged players occasional magic resets.

Single table poker tournaments are a good way of thinking about ZSG or NSG in trading imo. 8 players around a table. 1 or 2 pros. 2 or 3 regulars and the remainders are 2 bob chancers. The table host takes a rake (or spread). There are lots of scenarios you can game play with. my 2c.

 

[tar]

I do not understand how many posters who trade dozens of times a week have not transferred their attitude from "taking a punt" mode to "running a business" mode, because the latter is what it is. Anyone who is running any kind of business, at all, must have a plan to calculate his expenses and trading can be very light on overheads in comparison to office rent, machinery maintenance and replacement, labour, etc. Anyone who thinks that trading is going to have no overheads, at all, is living in cloud cuckoo land. The spread is a busuiness overhead, as is computer cost, electricity, etc. Most professionals take more modest profits than many realise because they cannot take the risk of not covering costs.

There is a major difference here :

Business : If you don't offer a service then you're selling something , you buy at wholesale and sell at retail .

Trading : You buy at retail and sell wholesale = "spread" . Unless you are a local or a MM then you buy wholesale and sell retail = IG , Pit traders ... etc .

Big difference between models , the challenge is in the model itself , the more you trade the worse it gets , however in business the more you trade/sell the better it gets . The problem with traders is they calculate their overhead in a trade by trade basis , the moment they cover the spread they consider themselves in profit , businesses don't calculate costs like this ...

Dont want to change the topic , sorry again ...