Trading Transaction Costs

[andyfuller]

So they were saying the share price had gone to say 298 but had only really gone to only say 305? Don't suppose you know if it was on a mainstream stock or a smaller one?

I personally never use stops for trading on Betfair and can't say I see the point really on say Spreads. I can perhaps see a use for Guaranteed Stops as they offer something different.

Regular Stops to me are for people who lack discipline and a plan. If you know what price you will get out at and the market reaches that point and you then assess the situation and you decide it is going to return you get out every time. If you can't trust yourself to do this I see a need for Stops but all they are doing imo are taking away the decision from you to try and close your position but you can't be sure to get out. Guaranteed Stops differ in that they, well, Guarantee to get you out.

The only other use I see for them is if you can't watch a market whilst you have a position but personally I like to watch everything when I am exposed.

Anyone agree or disagree with the above?

P.S. That is the next book on my list to get, wish I could read quicker

[andyfuller]

Enzabella - The music has been put on to the video at a later date. Reason I wondered is that Peter is learning the Piano though knowing him he is now up to Classical Standard

[superfrank]

So they were saying the share price had gone to say 298 but had only really gone to only say 305?

Don't suppose you know if it was on a mainstream stock or a smaller one?

Anyone agree or disagree with the above?

P.S. That is the next book on my list to get, wish I could read quicker

Yeah.

Can't remember.

Agree - I sometimes use a wide stop in financial trading just in case of disaster!, but generally I don't like them (the only thing you're guaranteed of with a stop loss is a loss!).

I'm a cr@p reader and have only read half my trading books (and I've got less than 10!), but I flew through BTFD.

Trading books topic - viewtopic.php?f=35&t=3838

[andyfuller]

I'm a cr@p reader and have only read half my trading books (and I've got less than 10!), but I flew through BTFD.

I wish I could read them as quickly as I add them to my reading list One thing I always do which I got from something Peter said, is always keep a small note pad with me especially when reading just to jot ideas down as 10 mins later the idea has been replaced by another.

[Iron]

Regular Stops to me are for people who lack discipline and a plan.

In that case, some of the most successful traders in the world lack discipline and a plan, including market wizards.

In the financial markets, trend followers use stops because they don't see their job as being to read the market. They want to get out ASAP if the price goes against them, and let their profits run if it doesn't. Stops are a pretty good way of achieving that goal...

[quote="andyfuller]If you know what price you will get out at and the market reaches that point and you then assess the situation [/quote]
I'm sure that's a viable approach, but it's not the only approach.

Whilst you're assessing the situation, the market might fall further against you. So there's something to be said for just getting out ASAP and preserving your capital. You can always re-enter the market if it goes back in your favour. And if you take that view, a stoploss is the quickest and surest way of getting out of the market.

Another consideration is this. A market has been drifting. It suddenly spikes by 5 ticks. The guys who were laying might now start backing in a rush to get out of the market before it moves further against them. Other backers see the spike and think it's part of a new trend, and throw their hat in the ring. Although the price might not drop further, it's arguably dangerous to be potentially going against both scared money and excited money!

Jeff

[Iron]

Keep watching from 5.49 minute of the video @ 16H.29M.15S, the manipulator has done a marvelous job for ,more or less, 6 minutes but he left an open window for 45 seconds for everyone to take a nice juicy profit.

I don't think the manipulator gave up or let his guard down!

I think he deliberately pushed up the market, laying it as it drifted. He then backed the market at 8.0 before flipping it back down again (by putting in back orders and cancelling his lay orders).

He knew that, when the price was drifting, people would rush to open trades, and when he caused the price to collapse, people would rush to close their trades. This both created liquidity for him and helped to push the market in the direction he wanted it go in.

Jeff

[superfrank]

some guy on another forum did some basic analysis on the impact of transaction costs on some popular futures for short-term trading. see attached.

There are three assumptions that I made

(1) you stay in a trade about 15 minutes
(2) you pay retail level commissions
(3) you enter a long trade at the ask and a short trade at the bid, and therefore you lose the bid/ask once per roundturn

the best contracts to trade are unsurprisingly the most volatile ones...

CL - Oil
FDAX - DAX
TF - Mini Russel 2000 (a US stocks index)
GC - Gold

so many budding traders in the US start out scalping the S&P500 (ES) because it is the most liquid (and most talked about on tv) but it is very poor value.

for longer term trades the transaction cost impact is obviously much smaller. e.g the DAX can easily move 500 pts in 3 months (1000 ticks) - tick value €12.50 ($16.25), approx commission per trade/contract $3.60.

[Iron]

I received an circular email yesterday from the guy who write the No BS trading manual (http://www.nobsdaytrading.com/), which is about how to ladder scalp the financials.

He wrote:

There are two main reasons why I trade the treasury markets and why I advise that people at least look at them.

1) It's what I was trading when I finally figured out how to play the game to win and I'm biased. When I was at the prop firm, this is what we traded. Many of the big firms focus on the treasuries because of the spreading. A lot of firms do not want to take outright positions and are always looking to hedge. The treasuries are good for this. You can buy the 10-year and sell the 30-year, buy the 30 and sell the 5, buy futures and sell cash, etc. This spreading action can create setups for scalpers like myself. Sometimes the players tip their hands when they're spreading. You can see similar spread setups in the Bund/Bobl/Schatz and in the calendar spreads for Eurodollars but you won't find it in the stock indices. People who don't trade treasuries don't understand how this is an advantage but it is.

2) The commissions. I cannot emphasize this enough. New traders do not take this into account. They should. Here's why. The CME exchange fees are more than the CBOT exchange fees and therefore, it costs you more to trade CME products. Currently, somewhere around $1.20 a round turn more. If you trade the S&P and I trade treasuries and we both do 10,000 turns in a year and we both make $100,000 trading, I clear $12,000 more than you do after commissions just because I trade a different product. Granted, if you can dominate the S&P and can't trade treasuries to save your life, the obvious choice is to pay the higher commission but the difference between the two rates is something to keep in mind at all times.

Jeff

[superfrank]

I do much of my financial trading on the BUND (and correlated instruments). they are not as good value (in commission/volatility terms) as oil, gold or the DAX, but the lesser volatility makes trading discipline easier (and there's still enough volatility to make day trading viable from a commissions pov). also you have the stock markets to look at for helping with entry/exit points (bonds and stocks are generally inversely correlated).