Hey guys, Im currently working for a prop firm just started three days ago, no salary, but no input capital either. Trades equities and options and fx.
My questions is that if a firm doesnt market make, which my firm doesnt. Or if the firm doesnt employ HFT/Algo's to scalp or do pattern recognition etc.
Isn't the edge gone for this firm?
Unless you're working for GS, ML, JP or Optiver, DRM etc. Those other firms can't really be making money, can they?
They make money from management fees and possible performance. They tend to be more client friendly and stay in contact with LPs. That's part of their value added. Hey, if you can consistently beat the market picking equities or ETFs, you might be better than an algo. Keep in mind many algos lose money.
The place im working at is giving me buying power and training me and seems to really care about its traders.
But take for example Jane Street, they employ HF strategies, or arbitrage which really only works when you have an edge. The HF's and arbitrage algo's run on very fast computers and basically take the one penny spread, the get flashed orders faster than others and buy and sell in microseconds basically a risk free trade.
But what about other traders that aren't trying to scalp fractions of pennies in microseconds (HF), suppose you're a oil trader, or a options trader, and you're not using algo's designed by quants or market making and executing large orders for clients.
These guys not doing these things must have an edge of some sort that allows them to profit where others cannot. Beating the market as you say.
But is it really ever possible for one person to constantly beat the market? I'm skeptical because if you're not doing HF, Arbitrage, Market Making, you have to be assuming risk trading any security.
With risk comes uncertainty and there is no system out there that can honestly beat everyone else constantly.
My opinion is that traders can go on runs when their "ideas" turn out to be right but they can be wrong just as often and their bets can sink them. Ever hear of Brian hunter from Amaranth, he traded natural gas and made the firm billions and lost billions as well
http://www.investopedia.com/articles/07/amaranth.asp#axzz2JP3bZqh6
The edge I feel separates you from the retail investor and makes you less of a gambler and puts the stats in your favor, otherwise without an edge, you're just a monkey pushing the send order button hoping it all works out.
Thats just my two cents.
So why did you take the job?
Only job I could find in this market to be honest. But I do wenjoy it alot and would love nothing more to be successful but trading feels like professional poker. I dont like that plus I feel like the deck is stacked against me playing against the big boys making markets and doing hf
you're making excuses and/or not looking hard enough. markets are very competitive but you can still make money by analyzing the secondary and tertiary effects (especially secondary and tertiary effects as it affects other markets) of an event while the market is still pricing in the initial event. that comes from having a better understanding of that information than other people. so that's one way.
another is to place relative bets by having a better understanding of the underlying legs than others and understanding why the market is pricing them how it is, and what would change that. if you think of something that could change, say, the spread between macys and jc penny, what would it be? why? what could cause it? why would that be more likely the happen than the market thinks?
much of it comes from brute analysis and being willing to look at things nobody else wants to.
i don't know that's off the top of my head.
You're right. Of course you can't hope gain an edge without the resources of a HF backing you up. I strongly believe price action analysis is the only way individual traders can make money off the market. http://www.learntotradethemarket.com/
There're lots of strategies that I'm developing including level 2 analysis etc.
But how do traders who aren't market makers or algo/hf, how are they gaining an edge?
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