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Brokers and Banks as an Institutional Trader 4 replies

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Is anyone here an institutional trader?

Quoting Vogon
Does the retail trader have ANY usable visibility to the trade volumes that are occurring in the Spot FX market?
No. No, you can't have visibility to ALL trade volume in the spot FX or retail FX space. And no, any visibility is probably not usable in any way. I imagine many retail traders will disagree with me, especially on that last "No". To these traders, don't bother trying to convince me otherwise. I've heard it all before.

Quoting Vogon
I get the feeling that even during "seemingly" low volume sideways movements the actual volumes might sometimes be huge,
Your "feeling" could be right. With no intent of being flippant, "trust your feelings, Luke!"

Quoting Vogon
and if known could it be a clue to future movement of price.
Even if you know the temperament and the order sizes of the traders holding those LIMIT orders that are (more often than not) keeping price in a sideways range, what you will never know is the ever-changing motivations of the traders who are angling to test the willpower of other traders who also have STOP orders around the same levels... i.e. you will never know who will blink first and thus cause price to break up or down. In most cases, a glance at the overall trend in a HIGHER TIMEFRAME is probably the best clue you could have. It worked for old school prop guys like me, it should work for you too.

Quoting Vogon
I guess that I am looking for confirmation that for the retail trader, Price is the ONLY indicator we have. Thanks Guys
Magix will disagree with me (and I respect that. ) But if you're looking for order flow to confirm what you can already see on your own charts, you're wasting time.
I'm not trying to convince anyone. I'm not in the "convincing" business.
Quoting SupraSense
{quote} Base salary for most traders is not that high, so you're relying on being very good and getting a massive bonus. Prop trading has declined significantly in recent times and even execution trading is being pushed to algos more and more. It's not a career to go into, because there are decreasing opportunities. In terms of financial freedom and so on, well as you earn more you spend more, but you'll still have financial worries and if you did actually find a prop role you'd have worries about that account, so money worries will persist. It's...
No no baby you misunderstand... What I mean is get in there, work your A off for 10 years, be ready to get humiliated by your superiors, betrayed by your best friedns, get humbled a 1000 times by the market and basicly cry like a baby asking why the world treats you like this . BUT ... After your 10 or something years , you might be lucky enough to walk away and live your life the way you want "sipping gin an juice , laying underneath a palm tree" .
Good luck to us all
"Always be yourself " Batman
Quoting seaman2
{quote} that is easy. even birds know that. this guy will start selling when you are buying. how else could it be ?!?
Perhaps.
The road to pipland is arduous and fraught with challenge.
Thanks Skenobi, that was lengthy reply and it looks like I've been living in cuckoo land for a while. What I can say is that after reading a few points you made, it's not looking as rosy as I thought it did, but then again what I thought doesn't look like it existed. I'll stick to trading on my own then...
Thanks Jacob & Skenobi,

From 1mil to 25mil in a span of 12 years, that's 34% compounding annually. That sounds reasonable. :-)
Quoting lithium1
Thanks Jacob & Skenobi, From 1mil to 25mil in a span of 12 years, that's 34% compounding annually. That sounds reasonable. :-)
Haha you sound like my old Head of Trading, that was his argument.
Quoting skenobi
Magix will disagree with me (and I respect that. ) But if you're looking for order flow to confirm what you can already see on your own charts, you're wasting time.
Nah...

You'd have to qualify the statement a little better before I'd step in.



Keep on chatting though dude...there is much others can learn from your experience!

Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
Sometimes I envy young people today. It took me a decade to work through every iteration of every kind of indicator and recognize that it was all garbage. A naked chart, price points for entry and exits, and MM are all you need.

And here an institutional trader tells newbies this on the spot.

Man I wish I could roll back the clock just 20 years!
If you are good at something, never do it for free--Joker
I am greatly interested in this thread.

I would like the institutional traders to succinctly give us retailers, if they could, lessons for us to learn, to perhaps make us better traders - a sort of summary of the discussions above and/or extra observations.

Thanks,

Smiler
Keep It Simple Stupid
Quoting Smiler
I am greatly interested in this thread. I would like the institutional traders to succinctly give us retailers, if they could, lessons for us to learn, to perhaps make us better traders - a sort of summary of the discussions above and/or extra observations. Thanks, Smiler
I thing the first you should realize is institutional traders don't really know any more than the "retail" trader ( I put retail trader in quotations because what makes you (and myself now) retail is we get horrible spreads and position rolls for those who carry trades overnight. otherwise you are just as much a trader as I was when I traded at my bank.

Before I even begin, you your trading account is you primary source of income then you are at a disadvantage from the start. If you are paying your rent from your trading p/l it's tremendous amount of pressure. I realize trading is about making money BUT if you basing your trades on how much money you want to make on it or how much your are willing to lose on it then it will be a struggle (not impossible, just not a healthy environment financially and emotionally)

I can only speak for myself as far as what made me successful from a prop or discretionary trading point of view (I won't include the skill set needed to manage a trading book in a bank)

I'll try and put it in order of importance.

1. I (tried) never followed anyone else's trades or trading styles. You have to find your own way and style of trading that works for you based on your personality. Advise is fine, and when I started out I would ask the senior dealers what they were looking at and how they thought about trading but ultimately you need to develop your own trading style.

2. I wrote down (tried) every trade I executed! You need a big enough sample size of trades to see how and where you lost and made money. I would see if I suck to my "plan". If I did then maybe I need to change my strategy (which I did a few times before I came to the system I trade now which has proven to be successful for me) or maybe it just wasn't a good market for my trading style. In that case I would sit back and wait, you don't need to trade everyday!!!

3. I (tried) never average a losing trade. There are times where it may work but over the long-term its a recipe for disaster.

4. I never (tried) to pick tops or bottoms. I can't tell you how much of my p/l went down the proverbial toilet thinking "this currency is way over done to the topside or it's gone down way too much it has to bounce any second".

5. I (tried) always to trade with the trend. I know you and everyone else has heard this time and time again but it is true.

6. I (tried) didn't feel the need to trade everyday. Sometimes the market just plain sucks and its best to do nothing.


The above is what worked for me, others may disagree or have differing opinions which is fine if that's what works for them. We can all have different styles and still make money. Also if you noticed I have put tried in parenthesis to point out that I still make the same mistakes I did years ago only not as much as before
Quoting Smiler
I am greatly interested in this thread. I would like the institutional traders to succinctly give us retailers, if they could, lessons for us to learn, to perhaps make us better traders - a sort of summary of the discussions above and/or extra observations. Thanks, Smiler
I thing the first you should realize is institutional traders don't really know any more than the "retail" trader ( I put retail trader in quotations because what makes you (and myself now) retail is we get horrible spreads and position rolls for those who carry trades overnight. otherwise you are just as much a trader as I was when I traded at my bank.

Before I even begin, you your trading account is you primary source of income then you are at a disadvantage from the start. If you are paying your rent from your trading p/l it's tremendous amount of pressure. I realize trading is about making money BUT if you basing your trades on how much money you want to make on it or how much your are willing to lose on it then it will be a struggle (not impossible, just not a healthy environment financially and emotionally)

I can only speak for myself as far as what made me successful from a prop or discretionary trading point of view (I won't include the skill set needed to manage a trading book in a bank)

I'll try and put it in order of importance.

1. I (tried) never followed anyone else's trades or trading styles. You have to find your own way and style of trading that works for you based on your personality. Advise is fine, and when I started out I would ask the senior dealers what they were looking at and how they thought about trading but ultimately you need to develop your own trading style.

2. I wrote down (tried) every trade I executed! You need a big enough sample size of trades to see how and where you lost and made money. I would see if I stuck to my "plan". If I did then maybe I need to change my strategy (which I did a few times before I came to the system I trade now which has proven to be successful for me) or maybe it just wasn't a good market for my trading style. In that case I would sit back and wait, you don't need to trade everyday!!!

3. I (tried) never average a losing trade. There are times where it may work but over the long-term its a recipe for disaster.

4. I never (tried) to pick tops or bottoms. I can't tell you how much of my p/l went down the proverbial toilet thinking "this currency is way over done to the topside or it's gone down way too much it has to bounce any second".

5. I (tried) always to trade with the trend. I know you and everyone else has heard this time and time again but it is true.

6. I (tried) didn't feel the need to trade everyday. Sometimes the market just plain sucks and its best to do nothing.


The above is what worked for me, others may disagree or have differing opinions which is fine if that's what works for them. We can all have different styles and still make money. Also if you noticed I have put tried in parenthesis to point out that I still make the same mistakes I did years ago only not as much as before
Quoting JacobFordFX
{quote} I thing the first you should realize is institutional traders don't really know any more than the "retail" trader ( I put retail trader in quotations because what makes you (and myself now) retail is we get horrible spreads and position rolls for those who carry trades overnight. otherwise you are just as much a trader as I was when I traded at my bank. Before I even begin, you your trading account is you primary source of income then you are at a disadvantage from the start. If you are paying your rent from your trading p/l it's tremendous...
Such a good post, it's worth posting twice

But seriously, I agree with what you have said. Capitalisation is massively important. The person trading with a few thousand, hoping to turn it into millions is not only extremely unlikely to do that without living costs being a drain, but with living costs as a drain on account, he has no chance.

The main components of good trading have already been put out there, but it doesn't mean people are able to follow them. In the end people do what they want to do. If you work in a bank, you have people watchign what you're doing, you have risk departments who will flag things up to prevent traders doing things which cause blown accounts.
yes..can i help u?
[quote=SupraSense;7492352]{quote} Such a good post, it's worth posting twice

oops sorry about that everyone
Interesting thread.

I also have a few questions.

Did you develop over the years a feeling about ranging and trending phases and how to trade that?

What was your max. allowed trade size and max. DD?

How much did the best dealer make in one year and how many unsuccessful traders/newbies were fired (on average)?

Is that also true that only 5% "survive"?

Thx
To No-Luck

For me "feel" is very important. The only way I was able to get that feel or"intuition" or "hunches" was to sit in front of my screens and just watch the markets constantly whether I had positions or not. Something I do to this day. Even though the majority of my trades are generated by my model I take advantage and trade on certain feeling or hunches. Feel or intuition or hunches are your sub-conscientious telling your conscientious mind "listen you dope, I've see this pattern or price action a thousand times before and the probability is a certain thing will happen. Don't question it just do it."

Max trade sizes are really different for everyone based on seniority and the product you traded. Suffice to say I had plenty of rope to hang myself or make my budget. My max drawdown was 250K in one day, if hat was reached I had to go to my boss and explain the position. The DD for the month was 1.2 million, if I reached that then they would shut me down for the rest of the month.

The Best Dealer question is also tough to answer because it depends on the product traded and/or the currency pairs you ran books for, the amount of customer flow, the bid/offer spreads you could charge the customer, etc. Lets say some dealers never put on prop trades, they made their budgets on the customer flow. Some had very little customer flow or very narrow margins so they had to do more prop trading. Some made money both ways. Management knew which "seats" were money makers and which were like trying to get blood from a stone. So you saw some dealers who had huge p/l numbers next to their names who's bonus may have been 1/10th that of someone who made much less.

In my 12 years, just on the spot and forwards/NDF desk I saw about 40+ firings on a desk that staffed about 15 dealers.
Thank you Skenobi for your insightful response to my questions. I have more questions. Any IT or former IT can answer.

From an ITs perspective what is "usually" occurring during candles with long tails or wicks? Regardless of whether they form an actual longer term turning point.

When an IT or the Institution at large finds itself with a large losing position. Say price gaps big against their position. How do they protect their book?
Do they somehow hedge and then wait for price to come back to unwind the position?

Thanks again
Thanks for all the fish
JacobFordfx

Thanks for giving us the absolute values in terms of drawdown allowed in your trading account at the bank. What does that translate to in percentage terms. Were you allowed 1% a day, 3% a month?

How did that work for you, very interesting stuff here!
If you are good at something, never do it for free--Joker
Quoting jmn5611
JacobFordfx Thanks for giving us the absolute values in terms of drawdown allowed in your trading account at the bank. What does that translate to in percentage terms. Were you allowed 1% a day, 3% a month? How did that work for you, very interesting stuff here!

My risk and drawdown wasn't determined in pct points, it was an absolute USD amount. They gave limits based on the volatility and liquidity of the books (products and currency pairs) you managed. I don't that really answers your question. If I understand your question, I had a soft drawdown of my own for my overall p/l in order to keep on track to make or exceed my budget.
Quoting JacobFordFX
1. I (tried) never followed anyone else's trades or trading styles. You have to find your own way and style of trading that works for you based on your personality. Advise is fine, and when I started out I would ask the senior dealers what they were looking at and how they thought about trading but ultimately you need to develop your own trading style.
this cannot be told enough, awesome post, many thanks
PM me with coding requests and I'll probably put you on my ignore list
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