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Strategies & Market Trends : Trading For A Living -- Ignore unavailable to you. Want to Upgrade?

To: Eric P who wrote (163)	5/22/1998 11:15:00 PM
From: KonKilo	Read Replies (1) \| Respond to of 1729

Thanks for the invitation to PM, but I think this subject is of interest to others... Are you writing this code (it is coding, isn't it?) yourself? Realtime expert system? What is this? Could you go more into depth on how you made/found/bought your system?

To: Eric P who wrote (163)	6/2/1998 9:27:00 PM
From: Marc D.	Read Replies (1) \| Respond to of 1729

Eric, I have a question about your automated trading system. Does it always enter a trade on the long side? If not, how do you go about finding out whether or not your stock can be shorted? Do you scan the candidate against the J.B. Oxford/Castle short list first? Marc

To: Eric P who wrote (163)	3/31/1999 7:31:00 PM
From: Eric P	Read Replies (2) \| Respond to of 1729

It appears that the interest in this thread is beginning to slip away. I'll try to stimulate a little discussion by reviewing some of the things I have done and learned during the past 6-9 months. As some of you might remember (beginning with post 163), I began my daytrading pursuit by developing an automated daytrading platform over a year and a half ago. This past September, I began working only part-time last September to enable more focus on my trading and hopefully determine whether I could be a successful daytrader before giving up my job as an engineer. I would strongly recommend this to others considering a career in daytrading. DO NOT give up your career on the hope of 'making it' as a daytrader. Most people lose money daytrading. Repeat: Most people lose money daytrading. Do not burn any bridges at work, or even leave your full time career unless you are confident you can succeed at trading. Propose to work part-time, or take a leave of absence, if possible, to allow yourself to explore daytrading. Respect the fact that the odds are against you to succeed. With this in mind, explain to yourself why you think that you will be able to succeed despite the odds. If you don't have some reason or edge that will help you succeed, then you will probably fail. For me, I believed that computerizing and automating my trading would give me the speed and reproducibility to have an edge in the market. If I could develop a successful trading system, automation of my trading would allow me to reproduce my results without the stress and difficulty of making split second decisions consistently the same week-in and week-out. In addition, I had been 'paper trading' several momentum systems, and they were consistently profitable while trading 40-100 trades per day for several months. Therefore, I took a big step and went part-time from my job. It didn't take long to find out that there is a huge difference between 'paper trading' and real trading. I thought that I was being conservative in my paper trading by assuming $25/ticket commissions and giving up the spread on every trade. However I learned that the biggest challenge in momentum trading is actually getting filled! Market makers will not (often) fill you at their posted price when you want to buy in a rising market. This was not intuitive for me; I assumed, incorrectly, that a posted price would be honored and that my orders would be executed against. NOT! (cont)

To: Eric P who wrote (163)	3/31/1999 8:10:00 PM
From: Eric P	Read Replies (1) \| Respond to of 1729

The problem of getting a fill from market makers makes profitability even more difficult. In fact, for the newbies out there, I will list some of the things with make profitability very difficult: 1) The SOES system is virtually worthless. You will not get a fill using the SOES system, unless the stock is poised for a quick reversal, which will make you out to be a sucker. I would strongly caution people to realize that the SOES system gives market makers the tools needed to take advantage of you. 2) The SelectNet system is also virtually worthless. See #1, above. 3) Market makers are now allowed to quote as little as 100 shares on a stock. It is extremely difficult to be profitable without sufficient liquidity to enable a daytrader to get in and out of 500 to 1000 shares at a time. 4) Market makers are allowed to keep their quote posted for up to 17 seconds after they fill a measely 100 share order, then they can back away from their quote without filling any additional orders. Note: This is after they have delayed the market for 17 seconds with their fictitious quote posted on Level II. 5) Commissions: Daytrading commissions of $15 to $25 per ticket add up fast. Assuming you only trade 10 round turns per day, you will generate $2000 per week in commissions. That is over $100,000 per year! 6) The Spread: Assuming you make 10 round turns per day, and give up an average of 1/16 of a point for the spread on each 1000 share trade, you will be losing over $3000 per week ($160,000+ per year). 7) ECN's: Many people believe that using ECN's are the only way to profitably daytrade. I will not argue with this. However, one challenge that this creates in that you may end up getting a fill for less than your full order. It can be frustrating, and loss creating, when you get filled for 58 shares out of 1000 ordered. These factors and others make daytrading very difficult. It is much harder than non-daytraders would ever realize. If you are very fortunate, you will break even, or only lose a little, until you have gained the knowledge and experience to daytrade profitably. Recognize, however, that there is no guarantee that you will ever become profitable. (cont)