October Trading

This completes my 6th month as a trader! It has gone so fast and next month I will be trading gas oil - heating oil which will occupy me when fixed income is a little dead, and it's very much an action trade. I cannot wait!!! Maybe I will end up trading it as my main trade but for now I will be trading it on the side.

My month below, before costs:

My job explained

You know if your competing for the top place as a trader you can't afford to sit back and take it easy all the time because then the guys who are not as good at trading but were aggressive and avoided bad luck will be over taking you. Enough of those guys will just lose it all but risk taking will always be a big factor of your success.

Risk taking does quite interest me, like when you pay insurance you are paying a premium for them to cover the extreme situation but on average you would be better of paying no insurance, obviously, it's just taking a losing bet but one you are often willing to take because you want to avoid the extreme situations. Even the insurance companies insure themselves with other insurance companies who do the same back to avoid going bust in an extreme situation!

I like risk because taking risk makes money, that's how the insurance companies profit and that's how I profit as a trader. Many people in the market are willing to pay the spread between the bid and the offer to obtain a price right now, I am trying to profit from this and get in and out quickly, but I don't trade outright much, I hedge myself and wait for the two products to revert whilst trying to work the bid and offer spread on each individual market to my advantage. The spread often reverts especially if nothing fundamentally is changing. The bid is just the highest people are willing to buy now and the offer is the lowest people are willing to sell if you want to sell lower you can do it instantly by selling it to the people on the bid and vice versa.

So my job is to scalp the market, so I am getting in and out quickly, it's offering a service to others and providing liquidity in the market place, it's useful for some others but let's face it it's not something to be proud of to do as a job although I love doing it. But it doesn't just make money so easily because money is being drained out of the market by the exchange and essentially the middle man and fundamentals are ripping spreads apart even on a hourly basis at times, news comes out during the day and sometimes it can be unexpected news like a downgrade on a countries rating. So money is being taken out by people allowing you to trade and the actual traders are fighting for the rest of the money but if your good the rewards are fantastic. In my job I am essentially selling something to buy it back at the next price down because I scalp and don't position trade, so I don't necessarily need to know the direction the market is going, it's kinda arbitraging. Interestingly people make money just by queuing on bids and offers, if your first in line you have a big chance to get back out at the same price and sell or buy it off/from the people behind you otherwise you have a free shot at queuing the other side to get out for a profit. Although getting first in line means taking the risk initially, your price could become hard to get back but once everyone has piled in behind you, its generally profitable as long as bids and offers aren't getting smashed so fast. You can always que for a price miles away from the action and be fastest to do so, then if it ever comes to that price you have a great chance to make money. I would assume you fight against fast computers to do that as when the market opens the prices all the way up and down are filled instantly. As prices move sometimes lifting (buying) the offer is the only way to get a good price, if you know it's likely to become bid then queueing the current bid is near useless!

What I do is trade similar products that move generally together, the markets make there moves on fundamentals but everything else is cause by panic, emotions and people reacting in different ways. In spread trading (where you buy one thing and sell something else closely related) you make money by the volatility in the market on a short term basis, the markets move independently but with some kind of correlation and you just get in and out. Also the spread has meaning because the difference between the two products say the 2 year and the 5 year German bond means something because lending money at different points in the future will give different returns and this changes therefore the futures curve shows if the economy is going to strengthen or weaken for example. So anyway most days the spread prices are just bouncing around a range, it's great because you just wait for it to hit the top and you sell the spread, it bounces back and you get out it goes a little further and you buy it and you work a good price by queing. Unfortunately there are many things going on in the world and the curve on interest rates on bonds is getting flattened and then being smashed back to an upward sloping curve constantly and queing can actually mess you about as the markets can move fast unexpectedly. So spread prices are being whacked around often but things have been pretty manageable and I heard there was a period of 6 months where nothing moved together in what I trade and it just took out loads of traders like me, unfortunately. Also when selling a spread you have to sell more when it goes higher having already sold unless you know something is changing and there's reason why it could continue to go up, because otherwise this spread moves a little further than you think all too often and all too often it comes back and by averaging it means you can cope when the spread trends, it normally trends with dips so it's okay and you would be paying up far too often without averaging. Although as you average your position quickly increases and it can get ugly.

Recently the markets are coming perhaps more efficient, say the bobl moves up, the schatz instantly flips, so the guy on the offer who is say 3/4 of it now buys at this price level making the offer now the bid and you didn't have time to sell the bobl on the offer and que the bid on the schatz or even take the offer on the schatz which would seem okay if the bobl already moved and you got filled on the new offer. That is what has changed in the last 2 weeks and apparently it's what happened "in the old days" it's okay you can still do your job as a spreader just it's a little frustrating.

Update on the month

Yesterday I was up 500 euros before the TED went down, I bought it and it kept going I had 48 by 60 on my largest position ever (600 euros a tick) I was on the verge of stopping out and by 9pm I reduced my position to 40% so I could hold it overnight and I was down around 800 euros. I also held 4 flys overnight and in the morning I came in and was shocked on the netting to see the fly which I had sold was printing up quite high, my PnL showed -2000 but that was based on settlements which don't mean too much, so I was really printing -1400 which was disastrous. Luckily the fly opened up at the same price and I got out for 100 euros profit on it. The TED came down lower and I got in and jobbed my position slightly. I had a chance to get out at a good price but only took a small amount off, as I always get out too soon, but it turned out to be the high of the day, sigh. It came down again and I couldn't really buy more so I felt pretty limited in what I could do. I was down 400 euros on the day and still had a loss of about 800 from yesterday and had all my costs to cover too.. I was short the fly now and basically took a loss of 300 euros on it, I couldn't see how it was going to break down as it seemed to have found a new range. I got flat with no positions on bringing yesterdays loss to a little over 500 euros and was up 130 for today. Even though it was approaching 4pm which isn't a great time to put a position on I decided I was going to stay. I made some great entry and exits on the TED and made 375 euros in about 20 minutes bringing my total gross profit to -39 euros for the two days which was good enough for me. After costs -£700 which is alot, but I could have been down a couple of thousand. The markets have been far from easy the schatz is impossible to lean, the price you are waiting to take gets taken by 1 person, and sometimes the next price gets taken all by one guy and your sitting there wondering if he will do it again, it's so hard to get in and out when it's like that. The good thing is it looks like I will make the target for eurex rebates which will be 2000 euros back for the month. Then there are some liffe rebates so I will cover my £1500 desk fee plus have extra left over and I am up £500 net for the month and I feel like it's been really tough for this week and last.

A long week

Thursday night and I was long the bund bobl schatz fly and I was improving my position and just as I bought some bobl there was a bobl stop downwards, it did 9 ticks in about 5 seconds and I clicked sell bobl as a reflex and was able to get back in the bobl only 2 ticks lower. It was frustrating and I held the fly overnight, it opened at the same place and came down more so I bought more and before I could get the bund on there was a bund stop which screwed me over big time. I was sooo frustrated I lost money in the TED trying to get out just because I was so offside in the fly and my positions were too big. I lost 500 euros just because of bund stops and not getting fills, for example I would be queing to buy the schatz and the bid would go down to the last few, people next to me were queing it and got filled but I didn't. The fly kept tanking and I was down at worst case 1200 euros, I felt sooo low. I felt like I couldn't click buy or sell because it would immediately do something crazy to screw me over. I carried on to improve my position during some news which caused the liquidity to go fast and did a great job. I kept improving my position even though the fly kept falling and soon was only down a few hundred on the day. I stayed till 6pm and got in and out the fly countless times making money buying it as it slowly drifted lower but obviously not in a straight line. I felt happy to know I had the skills to do this, which helped me relax and forget about the bund and bobl stops that had cost me money.

The fly made a small bounce back from the low and I got out, it was near 6pm and I couldn't see how it was going to go much more unless I stayed till 8 or 9pm. I wanted to leave the office so I decided to get out. 20 minutes later as I was updating some things on my PC the markets all tanked massively and the fly rocketed up giving amazing prices I felt sooo gutted. I hesitated to sell it which was a mistake as it would have given some profit instantly but I took advantage of the situation in the TED. The euribor was slow to catch up as it's likely very few people are watching the markets so I sold the euribor and bought the schatz which had fallen considerably, I got out for a tick within about 2 minutes which was cool. I finished up 257 euros, once again an amazing come back, considering the fly didn't bounce back whilst I was in it. I am breakeven for the week after costs but at least I should have covered my desk fee. Everyone has said how crap the market was for spreading this week so I am just content to have made about 1300 euros for the week, unfortunately I just traded a huge amount so costs were high.

A good day

Due to some kind of problem we weren't able to trade until 10.42am. I could see the charts and could see I was missing out on easy money, very frustrating. When I was finally able to trade things went really well, it was not a repeat of yesterdays frustration. Virtually every time I entered and exited a trade the market moved to give me a great price and I kept my costs low for the day and made £400+ after costs. The last few days I had struggled to make anything after costs so it was nice to bank a good up day.

Each month I pay the exchange money to trade, its charged based on the number of contracts I buy and sell and at the end of the month they give a percentage of it back. I am now trading bigger size than previous months and the money I get back will cover the cost of my desk each month. This is awesome because now I can just be happy to make money net and not have to keep thinking about a huge desk fee to cover. So like today when I made about £400, that is £400 I will have added to my months total after all costs. I am feeling much more relaxed knowing that as before I wasn't getting much back from the exchange and my desk was just huge in comparison! All this has changed because I sized up, I knew it was the right thing to do. I am staying on this size for now to try and build my account up as the next size will really hit my account hard when I have bad days.

Fly break out

Between 7am and 7:20am the fly tanked, 30 ticks. I was showing -1600 euros and bought some bobl to stop myself out, I ended up putting it back on at a worse price as I saw the momentum change in my favour. The fly did come all the way back but only half way initially. I didn't hold it for that long, I cut my position down to just 1 clip and was showing -500. I took that off and was completely out of the market with a PnL of about -400. I traded the TED for the rest of the day and finished up 65!! I didn't make a huge amount of trades so I didn't lose to much after costs. I did get so frustrated again though, I was first in line in the bobl to get filled and bought the bund back, it instantly fell and I didn't get the fill in the bobl and I missed the next bobl and the next... just before taking the bobl at a crap price I decided okay I will buy back the schatz here which was my other leg, I clicked to que the bid and it instantly was offered by 1700 and the price below traded. I then sold the bobl outright by hitting into about 15 lots and BAM it went 500 bid and traded up. It was so frustrating.. but I am so happy that I didn't have to stop out at -1600!!

Pure frustration all day

I was sleep deprived and the markets were frustrating for everyone but not only that I kept being first in line to get filled and then it wouldn't trade through me time and time again. Every time I lifted the last 6 on the bobl it instantly went 300 offered and took out the bid, sigh. It felt like I couldn't do anything right but it was more to do with people squeezing you into taking prices you didn't want. I did feel like I read the market well today, I bought the euribor on the low and made some outright trades which would have gone my way had I not scratched them. So I am realising sometimes I just need to wait and not be eager to scratch just because one guy needs to get out or has a different opinion and makes my position look bad for that moment. I scratched my euribor at the right time and legged half a tick on the schatz which I did because I thought the euribor was a clear buy I also held my schatz even when the price below was taken out because I couldn't see how that price would go offered, I guess today was just a very hard day to make money, the TED just drifted up and the fly drifted down, all prices flipped and squeezed you. This normally happens on days where there is little news due, like today.

New best week :D

Only beat my previous best by 11 euros though. Total gross profit this week: +2413 euros.

Today I spent an hour watching a friend trade who has recently started on fixed income, he is in a part of the company that has the "new guys". I found some things he needed to change and was doing my best to help, then this guy next to him asked me questions and started taking notes! quite a compliment I guess. Then after work in the pub there was a guy much older than me who has recently started and the guy who backs me asked if it was all right if this guy comes and watches me trade in the morning on Monday. I didn't think I had that much to tell someone who was new but I guess I have picked up a fair bit of knowledge in 5 months. I was always picking people's minds when I was new though.

4 days into October..

.. and already over a 1/4 of the way to matching last month! I am now actually scared with my size, stopping out kills you so much and my stop loss seems huge but that's just how it is. It's been over a month until I last stopped out so it's easy to get carried away with my expectations. Today I was getting so frustrated with the market and myself, I just lost a couple hundred euros on stupid mistakes/unfortunate timing. The spreads were ridiculously tight but I did okay. Tomorrow is ECB rate decision! but to be honest I get so bored during it. I just hope the spreads are good.

First 4 figure day!

I was thinking about it and yesterday I did it! +1008 euros, so awesome, about +£500 net profit for the day. The TED went 9 ticks today but I was selective and got out of it and back in and did alright. Anyway September is now finished and really pleased with how it went, here is a graph of my gross profit for the month!