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Ex Insti Trader... AMA

  • #21
  • Mar 18, 2018 6:04am Mar 18, 2018 6:04am
Quoting marcmarc
{quote} Hi alphaviech, An excellent thread. I am particularly interested (and agree) in your statement that profitable trading perhaps requires an unnatural thought process. Could you elaborate on what you see that as being? Many thanks
I think its mainly two things.
1) Humans like certainty which is something you will never have in trading. Seems like everyone is looking for some holy grail that always makes money which is something that doesnt exist. EVery system will lose money at times and every trader will lose money at times. And you have to accept that losing is part of it and embrace it so that you dont make a lot of mistakes simply bc you are scared that a position that is currently profitable will turn negative for a bit. I think that also goes hand in hand with the tight stops that seem to be used by a lot of retail traders. I mean how likely is it that you will sell at the exact high? You just have to accept that you will be in the red for a bit with almost every trade you take
2) The second thing is much more important bc the times when you can make a lot of money is in periods of extreme volatility. In these times its human nature to go with the herd which is almost always wrong. I mean look at the last few events that caused extreme volatility - SNB decision to remove floor, Brexit, Sterling flash crash and Trumps election. In every single of these events there was a panic reaction that was completely overdone and if you look at a medium time horizon of a few months you would have profited handsomly if you would have taken the other side of the panic reaction. ----- Of course when you trade in times like these you have to be incredibly careful with position sizing
  • #22
  • Mar 18, 2018 6:09am Mar 18, 2018 6:09am
Quoting triphop
Great idea Alpha. 1) Hedging delta is theoretically a continual process but my understanding is that in practice it's done with discretion in chunks. How did you manage it on the desk on a daily basis? 2) did you have any rough and ready ways of pricing up options without going through the full mathematical model? 2) The move to automation is winding its way around every dept. How long do you reckon until spot desks are fully automated? thanks fella appreciate it
1) Loop orders based on how your delta changes/on what your views on the markets are
2) All you do is adjust the volatility the rest is priced automatically by the systems (for Vanilla). You dont need too much advanced math on a day to day basis unless you have structuring responsibilities
3) Depends - there is always going to be humans involved but the Job is going to shift to how do I set my systems instead of where do i buy and sell. G10 this has pretty much happened in EM i guess it will be another 5-10 years or so.
  • #23
  • Mar 18, 2018 6:22am Mar 18, 2018 6:22am
I know you said you were trading 80% fundamental and 20% technical, but my question is, when you sat down to the computer at the bank, what was in front of you on the screen? Thanks

(I mean naked charts or order flow, or indicators,or whatever technical stuff)
Price and volume reveals everything. The market moves on supply and demand.
  • #24
  • Mar 18, 2018 6:24am Mar 18, 2018 6:24am
Quoting alphaviech
{quote} 1) Loop orders based on how your delta changes/on what your views on the markets are 2) All you do is adjust the volatility the rest is priced automatically by the systems (for Vanilla). You dont need too much advanced math on a day to day basis unless you have structuring responsibilities 3) Depends - there is always going to be humans involved but the Job is going to shift to how do I set my systems instead of where do i buy and sell. G10 this has pretty much happened in EM i guess it will be another 5-10 years or so.
Great info thanks. On 1, just trying to get a sense of the level of complexity you guys apply. would you loop between two given prices (horizontally), rising or falling channels (time-adjusted prices) or would it loop based on fluctuating values (eg greeks)? THinking purely of simple vanilla, no fancy digitals.
  • #25
  • Mar 18, 2018 6:35am Mar 18, 2018 6:35am
Quoting foobar
Hi Alpha, 1. Where do you get fundamental news from ? Can you recommend some good sources? 2. If fundamentals are more important, why is forex trading now replaced by hft market makers? Are the algos good at analyzing news now or do they just use client order books for longer term prediction. 3. You mentioned you are hold spot positions for weeks. The swap rates at a lot of brokers are far worse than if you traded using ccy futures. Do you have a good broker who offered you good rates? 4. Why do you have to start a new career from scratch if you...
1) Well it used to be Reuters and BBG. Now i use twitter & for big news events i think you can use something like CNBC or Bloomberg TV as they always cover the major news releases live.
2) Automated systems are simply better at market making. They are faster, more accurate and donīt make mistakes if programmed correctly. So naturally the market makers shift from humans to algos but that has very little to do with them being better at judging fundamentals.
3) Sorry I never bothered to compare brokers as my private positions are quite small these days that I donīt really care if could get better rates elswhere.
4) I think it is an incredibly stressfull career. Sure it is fun and I am really glad I did it but I just donīt want to be trading for the next 30 years & have a lot of other interests so a career change just felt like the right thing to do
  • #26
  • Mar 18, 2018 6:44am Mar 18, 2018 6:44am
Quoting Darastonius
I know you said you were trading 80% fundamental and 20% technical, but my question is, when you sat down to the computer at the bank, what was in front of you on the screen? Thanks (I mean naked charts or order flow, or indicators,or whatever technical stuff)
Well order book was always on one of the screens of course & when it comes to charts i just used really simple ones with RSI & Fibonacci levels. But that was just my personal preference - colleagues ranged from not using charts at all to charts that looked like modern art to me.
  • #27
  • Mar 18, 2018 6:50am Mar 18, 2018 6:50am
Quoting triphop
{quote} Great info thanks. On 1, just trying to get a sense of the level of complexity you guys apply. would you loop between two given prices (horizontally), rising or falling channels (time-adjusted prices) or would it loop based on fluctuating values (eg greeks)? THinking purely of simple vanilla, no fancy digitals.
You can`t break it down to only vanilla options as your book consisted of everything that was in there. But you have a system in which you can run reports that basically shows you what your current delta is and how your position changes if the price moves up or down by 25,50,100,150 etc pips and then you create your orders based on that & the size of the position you wanted to have at the respective levels. But the Option desk I worked on was doing EM I would assume for G10 a lot of this is automated by now as well.
  • #28
  • Mar 18, 2018 7:10am Mar 18, 2018 7:10am
Quoting alphaviech
{quote}5) On the spot side I am short EURSEK, EURUSD and Cable and I am long USDHKD & USDCHF. On the Bond side I am long US 10y/2y spreads. As much as I dislike Mr. Trump i think his views on trade will be good for the USD in the medium term. Once the whole political insanity calms down a little bit i think the increasing yield spreads should do their work and we should see a stronger Dollar. However it can be a bumpy ride until then.
You seem somewhat bearish on the Euro and rather bullish on the US dollar. Which IMO seems to be against what current views are.
No doubt the rising interest rate differentials between US and the rest of the world could be a prime mover of the USD. But does the political uncertainty in the US not concern you? Or the ever increasing budget deficiet? Or the strength of the euro in spite of political uncertainty in the eurozone as well as a known dove that draghi is?

Also, your views on the 2/10 spread seems to also be against the current sentiment (based on what I know). People are expecting the spread narrow. Is there any insight that led you to hold this view?

Hope to hear your thoughts!
I look for value wherever it can be found
  • #29
  • Mar 18, 2018 7:40am Mar 18, 2018 7:40am
Quoting alphaviech
{quote} You can`t break it down to only vanilla options as your book consisted of everything that was in there. But you have a system in which you can run reports that basically shows you what your current delta is and how your position changes if the price moves up or down by 25,50,100,150 etc pips and then you create your orders based on that & the size of the position you wanted to have at the respective levels. But the Option desk I worked on was doing EM I would assume for G10 a lot of this is automated by now as well.
Makes a lot of sense, I was thinking of the individual trades and of course you had the whole book on your hands.

Great thread, good shout for taking the time to do this, thx
  • #30
  • Mar 18, 2018 8:28am Mar 18, 2018 8:28am
Hi alphaviech,

In your opinion, would you agree that most of the intraday forex currency order flow is mostly random walk but then drifts when there is a news event or filling large customer order? Retail traders that trade intraday are constantly told to stay out when big news comes in but seems as though the only time you can truly find probable trades based on trading against the herd after the herd gets exhausted and returns back to the mean. Especially with the algos constantly probing for pending orders and stops, how can a intraday trader compete with a machine? This would make sense about the tight stops, basically makes you a sitting duck for the algos. Due to this fact, do you feel it would be better for beginning traders to trade swing vs intraday to give more room for stops?
  • #31
  • Mar 18, 2018 9:12am Mar 18, 2018 9:12am
1) Can you screenshot a picture of your computer working station?
2) what is the biggest lot size you have ever put for your banks?
3) how much do you make per month/year?
  • #32
  • Mar 18, 2018 11:06am Mar 18, 2018 11:06am
Quoting alphaviech
{quote} Find what works for you and dont try to copy somebody elses strategy. I am convinced that not everybody can be profitable at trading since I believe there is a very unnatural thought process necessary in order to make money.
Can you expand on said thought process please. Thanks!
  • #33
  • Mar 18, 2018 11:13am Mar 18, 2018 11:13am
Quoting synicz
{quote} You seem somewhat bearish on the Euro and rather bullish on the US dollar. Which IMO seems to be against what current views are. No doubt the rising interest rate differentials between US and the rest of the world could be a prime mover of the USD. But does the political uncertainty in the US not concern you? Or the ever increasing budget deficiet? Or the strength of the euro in spite of political uncertainty in the eurozone as well as a known dove that draghi is? Also, your views on the 2/10 spread seems to also be against the current sentiment...
I am more bullish on USD than bearish on the EUR hence only 2 positions involving the EUR. I think a lot of that policitcal nonsense has already price in (Just look at were DXY was a year ago) & as much as i dislike trump some of his economic measures should bring a great deal of support to the USD in the medium term. Just look at how many funds are repatriated back into the US.... Budget deficit doesnīt matter all that much I think - as long as USD is the reserve currency & the petrodollar system is in effect they can pretty much print whatever they want and people will buy it. But i could obvioulsy very well be wrong its just my humble opinion...

But yes i for sure like to go against the sentiment sometimes
  • #34
  • Mar 18, 2018 11:14am Mar 18, 2018 11:14am
Quoting alphaviech
{quote} 1) Well it used to be Reuters and BBG. Now i use twitter & for big news events i think you can use something like CNBC or Bloomberg TV as they always cover the major news releases live. 2) Automated systems are simply better at market making. They are faster, more accurate and donīt make mistakes if programmed correctly. So naturally the market makers shift from humans to algos but that has very little to do with them being better at judging fundamentals. 3) Sorry I never bothered to compare brokers as...
Do you think you could share some feeds with us that you think are best?
  • #35
  • Mar 18, 2018 11:21am Mar 18, 2018 11:21am
Quoting FXChaser
Hi alphaviech, In your opinion, would you agree that most of the intraday forex currency order flow is mostly random walk but then drifts when there is a news event or filling large customer order? Retail traders that trade intraday are constantly told to stay out when big news comes in but seems as though the only time you can truly find probable trades based on trading against the herd after the herd gets exhausted and returns back to the mean. Especially with the algos constantly probing for pending orders and stops, how can a intraday trader...
Yeah I would tend to agree that intraday moves are largely random. The second part of your question I really don`t feel comfortable answering in a general way what is "better" I can just say what worked for me...Scalping when there were moves that i thought to be overreactions (Be it from news, stops being triggered or large trades coming throught) and other than that keeping positions ranging from a few days to a few months.
  • #36
  • Mar 18, 2018 11:25am Mar 18, 2018 11:25am
Quoting CrocodileRex
1) Can you screenshot a picture of your computer working station? 2) what is the biggest lot size you have ever put for your banks? 3) how much do you make per month/year?
1) I never took pics on the trading floor as this is highly frowned upon and can get you in real trouble with your compliance department.
2) You mean largest order we had to work for a customer or largest clip size I traded at once or largest position I ran in my books?
3) You mean salary or how much our budget was that we were supposed to earn?
  • #37
  • Mar 18, 2018 11:27am Mar 18, 2018 11:27am
Quoting bojack34
{quote} Do you think you could share some feeds with us that you think are best?
For general news I like CNBC & WSJMarkets...

Sorry no exciting tips for you there
  • #38
  • Mar 18, 2018 2:22pm Mar 18, 2018 2:22pm
Hi alpha,

is there any advice you have for us to improve trading consistency?

since you have the consolidated order book for a bank, you pretty much know the direction for each currency for the whole day unless there is some major market news coming up. Doesn't that give you a huge edge over people who do not know that.
  • #39
  • Mar 18, 2018 10:15pm Mar 18, 2018 10:15pm
Quoting alphaviech
{quote} I would say there is Traders that in/decrease positions a few times during the day but it`s pretty much impossible to run a book and do this purely on a "day trading" basis and be square overnight. Yeah i guess that obsession with intraday trades is human nature...
Very informative. Thanks for sharing.
  • #40
  • Mar 18, 2018 10:22pm Mar 18, 2018 10:22pm
Do institutional traders use footprint charts ? Does the order book they use show pending orders 20~50 price levels above and below the current ask and bid price ?
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