A former sell-side investment bank US Treasury flow trader, now a private prop trader.
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Friday, September 7, 2012
Going home flat
If i was still at a dealer, i might go home still a little short the long end, but, i'm not at a dealer anymore. Hopefully there will be some volatility early next week allowing me to reset my short.
where did you get short? i was in early (too early according to your morning posts). did you get short approximately when you identified the short covering had ended (and posted about it)?
i had offers in at 133-15+, 16, 16+ and 17....only my 15+ got lifted @ 10:02...which was 1/2 of 1 unit (so 0.5 out of 6 units...or..1 out of 12 units)...it was so small i didn't post it. But, the great thing about trading is that next week is a new week..and every small win helps build confidence for the next trade.
Reading the short-covering event in real time is one of the more difficult aspects of trading this model. There is no formula. However, there are a few concepts that you can use to help guide you. First, when the market trades back thru the original price level where the large player initiated their position...that is where the decision to short-cover or not is made (or the reverse...long liquidation). Assuming you were paying attention when the large trader initiated their position, you know roughly how large the position is...and hence, roughly how much paper will need to trade after that moment to unload that position. After that, its all gut feel.
Regarding the way i scaled my orders...that is all based on risk tolerance. When i was trading in a flow seat, and i wanted to sell the market, i would hit the "aggressive sell" button on my trading pad to hit the market down...willing to give away a tick or so to get on the position. Normally, at the tails of the market, there is very little liquidity (little for a flow trader...liquidity is relative based on your size). However, trading your own personal money has more risk, and for the moment, requires that i be more detailed and conservative about how i enter and exit trades.
To answer your second question...mean reversion trades tend to allow more patience for entering the trade. However, there is no hard and fast rule regarding exactly how to enter or exit these trades...that part of reading the market is based on gut feel and your tape reading ability.
where did you get short? i was in early (too early according to your morning posts). did you get short approximately when you identified the short covering had ended (and posted about it)?
ReplyDeletei had offers in at 133-15+, 16, 16+ and 17....only my 15+ got lifted @ 10:02...which was 1/2 of 1 unit (so 0.5 out of 6 units...or..1 out of 12 units)...it was so small i didn't post it. But, the great thing about trading is that next week is a new week..and every small win helps build confidence for the next trade.
ReplyDeleteIs that the standard way you would enter this type of trade? and is it same or different than a rangebound mean reversion trade?
DeleteReading the short-covering event in real time is one of the more difficult aspects of trading this model. There is no formula. However, there are a few concepts that you can use to help guide you. First, when the market trades back thru the original price level where the large player initiated their position...that is where the decision to short-cover or not is made (or the reverse...long liquidation). Assuming you were paying attention when the large trader initiated their position, you know roughly how large the position is...and hence, roughly how much paper will need to trade after that moment to unload that position. After that, its all gut feel.
DeleteRegarding the way i scaled my orders...that is all based on risk tolerance. When i was trading in a flow seat, and i wanted to sell the market, i would hit the "aggressive sell" button on my trading pad to hit the market down...willing to give away a tick or so to get on the position. Normally, at the tails of the market, there is very little liquidity (little for a flow trader...liquidity is relative based on your size). However, trading your own personal money has more risk, and for the moment, requires that i be more detailed and conservative about how i enter and exit trades.
To answer your second question...mean reversion trades tend to allow more patience for entering the trade. However, there is no hard and fast rule regarding exactly how to enter or exit these trades...that part of reading the market is based on gut feel and your tape reading ability.