Ask a trader

AMA: Equities trader at an Aus based hedge fund

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dropbox.com/s/wrjn2gwdm0zxi2p/Books.zip?dl=0
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Do you trade from the orderbook aka price ladder aka DOM?

For the most part yes. DMA is generally the fastest and best way to get fills.
However for some smaller or illiquid stocks I gotta use algos to hide my true size

I'm from Aus too and I just got into Veeky Forums

What is your portfolio like? What were your first investments? Any advice for newbies like myself? Thanks

Could you talk more about how you hide your size and what to look for to spot you when you're working orders?
How long do you hold your positions? Do do stuff like no directional bias market making type activities, or something more like trend following position trade?

Right now own a bunch of gold stocks for a bounce. Short some resource names because Iron ore was rolling over.
My timeframe is very short so keep that in consideration.

First investment ever was BHP warrants - made a fuckton and lost it just as quick.

Advice: Read read read! Learn about risk management, learn about risk of ruin, but most of all, find yourself an Edge.
If you can't find one/takes too much time there's no shame in low cost index funds.

>How to hide/spot size
An algo will break up a large order into many smaller orders.
Say I put in a sell order for 10k shares shares at $10, and average daily volume is only 50k shares.
The algo might put 500 shares on the offer at $10, 1k @ 10.02, [email protected] and leave the rest in reserve.
Anytime someone tries to buy shares around $10, my algo will sell him some. The only way to spot it is to see a stock trade at/around a certain level and do lots of volume but go nowhere pricewise. Unusually high volume is a good indicator.

Have some longer term stuff (1yr+) and lots of shorter term stuff (minutes-days). Its mostly directional, ideally with the stuff that I get wrong gone in minutes and the ones I get right I hold for days

I think people call this refreshing the offer? Ive seen some videos on youtube talking about if you watch the DOM you can see it being refreshed.

So you work orders around a level not just at round numbers? Ive seen some people talking about how institutions only work orders at round numbers.

>Anytime someone tries to buy shares around $10, my algo will sell him some
how does this work exactly? Someone puts in a market order, what does the algorithm spot that and offer liquidity by placing limit order between the bid and ask or something like that? This sounds kinda like HFT, trying to be faster than the other liquidity providers.

Yup, that or icebergs. SMBC calls it a held bid/held offer. In my experience it could be anywhere. Its a bit harder to spot at round figures because you'd get natural buyers/sellers which muddies the water.

>Algo at $10
The algo makes the assumption that the buyer is rational, and if they're buying 10k shares they won't buy it at market and they'll slowly work the order up.
Depends on the algo but my 10k sell will most likely have 2k in displayed orders, 3k in hidden/dark/midpoints and 5k in reserve. So a market order hitting the stock would only hit 5k of my sell.
eg 500 @ 10.00, 1k @ 10.02, 2k @ 10.0999 darkpool/hidden, 500 @ 9.99

are aus hedge funds any easier/harder to break into than the US?

Interesting. Thanks.

Do you do any commodity futures or foreign exchange? If so, does this also apply to them?

>stuff that I get wrong gone in minutes
So you have tight stops? Do you often work out of a position close to breakeven? How do you scale out of a wrong position? I mean like do you use regular stop loss market orders?

I'd say harder since Aus has a much smaller finance scene. Also other asian jurisdictions have a much lower tax rate.

Futs yes, icebergs easier to spot since each tick is more meaningful, and a 1 tick adverse execution will get clients pissed off. So even if I ask my broker to buy 500 ES around 2165, they will get me done at 2165.00
FX no DOM and its more of a MM arb bot model

I scale in. When u start trading in size that doesnt facilitate easy entries and exits you can never go balls deep at the get go.
If I buy a stock that immediately goes against me, I'm generally out asap. If it goes my way I can chase or wait for a pullback, and build my position by buying more.
I do try to use stops in the liquid stuff that can absorb my entire position in one go. eg futs

You can get a DOM with forex futures like A6 etc.
Also I understand that with a prime brokerage you could get access to a aggregateor which will give you a pretty good, but not complete, peak into the orderbooks from the largest liquidity pools like Bloomberg, Reuters, Currenx, EBS, etc.

>I'm generally out asap
This is what wondering about, someone could possibly spot your stops being taken by seeing sudden huge volume hitting the offer since you dont use limit oders or scale out.

> can chase
It is interesting to hear of someone at an institutional level chasing price because Ive heard people before saying that institutions dont chase they wait for price to come to them.

Thats true. Main problem is that you always gotta worry about size on other pairs/3pt arbs. So in effect you're looking at 3+ DOMs, though that is somewhat mitigated by aggregrators...
Whole different skillset imo

The big guys all chase. By definition they are market movers since they can't just get set in 5 minutes with a DMA or even an algo. They take weeks and weeks and buy 10x ADV to get a position.
Interestingly enough, all the ones I've spoken with immediately stop buying stocks that they no longer need to chase. ie. price and volume come their way. 99% of the time its a bigger guy unloading and that does not end well.

Though 'value' type funds that trade 6 times a year do have the luxury of waiting around and buying dips and averaging

Asdf

What shares are good right now on the ASX?

I know they scale in by definition that means buying on the way up and sell on the way down. But I didnt mean that it qite like that as chasing price, I meant it more like waiting for retracements and working most of their orders as limit orders the price has to come to them instead of using market orders.
Maybe this is just a forex thing, I've heard a couple different forex mentors on youtube talk about how institutions do things like buy on down candles and sell on up candles.
Also let me try an example on the A6 chart, this may not be a good example, but it seems that the institutions repeated again and again the process of aggressively distributed on the green candles where I drew a line and price moved down with conviction then the institutions slowed down their distribution and let it retrace to wait to repeat.

>99% of the time its a bigger guy unloading
Maybe thats an equities thing. I've spent time studying the futures and there is a report done at the CFTC called commitment of traders COT that shows two diametrically opposed types of market participants: the commercials aka hedgers, and the non-commercials aka large-speculators. When the large-speculators are net long the commercials will be net short, and vice versa when the commercials are net long the large specs will be net short.
If I understand this correctly I'll try to make an example when price is going down the commercials will be hedging by accumulating while the large-speculators are distributing it to them and when price is going up the commercials will be distributing and the large-speculators are accumulating it from them.
And it's important to keep in mind that for every trade there is a buyer and a seller and even if all the retail traders in the world got together to do the same thing at the same time they would be able to take the other side of the trade with the big boys, retail cant provide enough liquidity to take the other side of the institution's trade, so by definition every trade is always one large player selling and another large player buying it from them, and one large player buying and another large player selling it to them.

FX is a bit diff as its zero sum. In equities there's wayyy more retail so you can have instos liquidating some positions into retail buyers.
With respect to buying on retracements and lim orders, it does happen a little in equities but volume is often more important than price.
How do u know instos are buying on those down candles and selling on up candles? Is the same one that is driving the bigger pic trend?

IAM

Timeframe?
If unsure, get into a low cost index fund like Vanguard

Fintech sector is very weak atm but looks promising. Lots of hurdles ahead though... one for the watch list

I dont know whether or not its the same institutions buying on the red candles and driving the larger tide. That's why I'm asking you since you're at the institutional level. I learned this from a couple different so-called mentors on youtube saying the same things, but I dont know if they are full of it. But you're right, while it does seem amazing that many times in a up move price will briefly retrace into a red candle, it could just be some sort of cognitive bias or seeing patters where there are really none.
One good experiment to screw with your mind is plot horizontal levels that are random using a random number generator to determine the levels and then watch price action and a lot of times it will seem like price is actually interacting with those levels even though they are meaningless.

How much equity in needed to begin successfull trading?

have u ever doubled down?

I'm an ozfag too, just made a quarter mil gambling on the election, paid off all my shitty unsecured debt and now have 200k sitting in shitty savings accounts getting 2.7% interest like a cuck, and another 70k in super, what the fuck do I do now? I was thinking maybe 10% gold, 30% ETF's & bluechips, 30% bonds, 10% cash, 10% commodities, 5% silver & 5% that I'll use to fuck around with options or fx or something.

Any suggestions on asset allocation or shit to read up on to start learning how to invest? I've spent most of my 20's trapped in debt, don't want to go back there.

I'm probably going to short Nvidia sometime next year, provided AMD's mid & high range cards at the end of the year are decent, that will peel off Nvidia's 20% bounce the other day, they won't be able to keep charging so much for cards / won't have 100% of mid & high end market share, not to mention as Vulkan & the DX12 API's become mainstream, just need to keep an eye on it & time the options right.

imo you simply can't tell. At least with equities at T+2 you'll see which broker did which trade, and you can narrow it down to retail brokers vs insto brokers and get a general idea of things.
Not sure if possible to get reliable data in FX to the same degree.
Do have a look at FXCM's 'SSI indicator' - it shows the aggregate net positions of FXCM clients which is essentially retail.

To replace your job? AUD$1mil. Not even joking.
To learn? $0 - just get some sim software. No point risking your cash when you start out.

Occasionally. Never even close to a Risk of Ruin scenario though

Wow grats! Tax free too!
>wall of text inc

Go hard or go home. No half measures when it comes to investing. If you're not willing to dedicate a significant portion of your time to learning then just leave it in an index fund and spend your time wisely elsewhere.
Same with any field. You wouldn't conduct surgery upon yourself or live in a DIY house unless you have really done your homework.
Don't be tempted to 'select' your ETFs - it defeats the purpose of passive index investing.
I think it is worth putting some money into a managed fund or two, with the following caveats:
1) It must have history pre-GFC. Too many funds started post 2009 with stellar returns are simply riding the wave. They'll be gone when the next blowup occurs
2) Long track record that beats the market during boom and bust years.
A good managed fund will move their portfolio to cash during the bad times so you won't need to worry about when to move to cash and when to jump back in.
Property is also a consideration somewhere in there buy Aus housing seems expensive as fuck to me

Thanks for making this thread.

I would like to ask about some more long term ideas of yours. In the long run; how much do you believe algo's will dominate trading; to an extent that retail will not even be able to demand a dominant niche.

Do you believe, or see any merit in technical analysis? Could trading be done only on technical analysis, or do you always need fundamentals?

To what extent would an accounting background help you with trading, granted that you spend a lot of time doing research into trading?

Do you believe the general tendency of stocks generally going up; to be true?

What are your thoughts about the long term future of markets? Will they always exist, and will they be accessible to retail, with ever increasing algo's and quant funds competing for profits?

Sorry for the long rant of questions. Thanks in advance!

is there a list of software that tracks stock prices live - to the minute, and tracks long-term changes to?

Preferably something under $1000 USD

GIVE ME A JOB PLS

Do you do any financial analysis / fundamentals or is that left to the analysts?

If so, what do you look for to get that edge?

>Algos long term
Net postive for retail investors, negative for retail traders, and even insto traders. Its already mostly algos in the day to day stuff

>tech/a
I think technical analysis does have its place. Has to be backtest-able and grounded in logic. eg VSA is good whereas stochastics are not.

>accounting degree
Probably only relevant for the F/A side of things. Most degrees do nothingggg

>stocks always go up
Yes over the long term. Look at the S&P total return index (includes div reinvestment)

>Future of markets
Trend now is towards bigger marketplaces. Investors would be little impacted by algos (probably even benefited)

Quite a few charting softwares do exactly that. I have not heard of any good free ones, most charge around $100/month in fees

Do u give good head?

For the stocks I trade regularly, I know them inside out. The rest I rely on t/a f/a and analysts.
My edge comes from backtested strategies - more statistics and heuristics rather than f/a or t/a

>pic related: t/a

How much do you earn

Is the bond hyper-bubble popping?

>Quite a few charting softwares do exactly that
really? I thought most didn't do up-to-the-minute stuff.

Most brokers offer free trading platforms with these features, but you there is usually some minimum dollar amount to open an account.

i'm an absolute newfag with a less than babby-tier knowledge of money, finance etc

i'm in australia too

what books and resources can i use to learn everything from the ground up?

I'm interested but everything in this thread is way above my head

dropbox.com/s/wrjn2gwdm0zxi2p/Books.zip?dl=0

these are the books that I have. it has The Intelligent Investor, Random Walk Down Wall Street, Against the Gods, et cetera

thanks

Varies. Last year a mil
Nah its fineeeeeee
Read up on everything. Not just f/a or t/a, not just books. A well rounded mental model is very important.
Also check out Risk of Ruin. If you've played poker you're probably already familiar with the concept.

i'm comfortable with a lot of topics

just never got around to econ/fin/biz stuff

will check out book

what's f/a and t/a? sorry for being dumb, I couldn't find anything when I looked it up

f/a = fundamental analysis
t/a = technical analysis

thanks

What do you recommend is the best way/qualifications to enter the trading scene ? I'm studying finance at uni but am fully aware that alone isn't enough.

Also once you're in the industry how do you penetrate the 400k plus salary class ?

As with mastery in any profession, effort and practise.
Idea->Backtest->Find edge->Choose color of Ferrari

Been going at it hard for a few years. Was a complete noob at first, but now have been consistently profitable day trading/scalping ZN futures for the past 6 months or so. Feels good man. Any advice? Things I should watch out for?

is Trump going to affect the global economy?

Consistency in a big liquid futs contract is really good. Scalability allows you to make more money for no more effort!
Do you keep stats? Hows your expectancy look?
If you're good at scalping thick liquid things like 10years, also look at the ES and maybe even german bunds
Also consider working at a prop trading firm once u get say a yr of consistent profitability
- Potential mentoring and learning from other traders
>Positives:
- Trade more size : you are no longer limited by ur capital base
- Risk manager to look over your shoulder: Someone else to look out for you to prevent a blowup and to slow you down when you aren't in sync with the market
- No more time wasted on accounting/fills/reconciliation/IT
- Faster connection speeds = lower latency (big for the truly crazy scalpers, also great for CSGo)
- The ability to make capital purchases without impacting your ability to trade: Take a holiday, buy a house, heck even start an investment portfolio, all without dimishing your capital base/ability to trade
- High volume turnover traders will appreciate the volume discounts/lower trading costs/rebatessssss
>Negatives
- You're losing some of ur P/L to the prop firm, and also desk fees. This is mitigated by the amount of your profit split (better if you're good) and the ability to trade more size
- Fairly cut-throat environment, people may try to copy what you do and hurt ur edge
- Cocaine addiction

Lotttts of stuff written about that. But in truth nobody has any fucking clue what he's going to do, let alone the impact

Thanks. Haven't kept stats on every trade. I've tried but found it distracts me while I'm trying to pay attention to the market. I keep an end of day journal and average about $120 a day, after commissions. Trading only 1-2 contracts for now, I'm just starting out.

I've tried to trade pretty much everything, corn, oil, cattle, ES, TF, YM, NQ, ZB, gold, currencies, etc. and eventually lost money on it all, except for ZN which just seems to make sense to me for some reason lol. Would have a much larger account if I had just stuck with ZN, rather than chasing different market moves all over the place and blowing up multiple times. :/ I think the slower pace is more my thing, just mentally. Easier to stay disciplined.

I'll think about the prop trading. From what I've heard there's a lot of shit I don't want to have to deal with, like noncompetes and desk fees, or holding some of your pay for months so you can't leave. Not really afraid of someone stealing my edge, I think it'll always be there, but maybe I'm wrong. You brought up a bunch of good points I hadn't considered though.