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We do not eat donuts. We are not allowed to eat in the pit. But I will eat
sunflowers and spit the seeds at other locals.
nea.
-----Original Message-----
From: Timothy Morge <tmorge@xxxxxxxxxxxxxxx>
To: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
Cc: Bob Fulks <bfulks@xxxxxxxxxxxx>; omega-list@xxxxxxxxxx
<omega-list@xxxxxxxxxx>
Date: Monday, July 20, 1998 6:44 AM
Subject: Re: Floor trader Study
>Neal:
>
>I think many people think that floor traders eat donuts all day long,
waiting
>for an order from the infamous 'public' to be handed to the pit. And
apparently,
>when that order hits the pit, all of the floor traders are able to
manipulate
>the price action to give that 'public' order a fill that is totally off
where
>the 'real' market is trading. Once the locals have sucked all they can out
the
>'public' order [meaning, got him and then ran his stop] they go back to
loafing,
>waiting for the next order.
>
>I'll stand up--I've traded for an institution, I've traded for my own
account,
>I've run my own fund with hundreds of millions of dollars of offshore
investors
>and I've been a floor trader. All of these take different skills. But I
found
>being a floor trader the most work, mentally and physically.
>
>One thing the interview you posted did not bring up, although you alluded
to it,
>is the principal of 'standing' in the pit. I know I never understood how
traders
>decided where to stand in the pit and it wasn't until I was a floor trader
and
>the opening bell was being rung that I learned that a floor trader earns
his or
>her position on the floor based on their willingness to trade. You said
'you are
>in more trades than you choose to be,' and I bet that went over many
people's
>heads. If you are a floor trader and you stand with your hands in your
pockets
>and wait until you are certain this is the one trade you want to make that
day,
>this is the sure winner, now you're gonna step up and take that 5 lot
position,
>you MAY find out that you are invisible. The more you trade, the more
people
>will trade with you. And that means you have to take some trades that you
>weren't particulary interested in taking. You take these trades because the
>broker on the step in front of you has to turn that 200 lot order and if
you
>take a chunk of that order this time, when you want a part of the next
order,
>he'll trade with you. So you take that trade and try to trade out of it
>gracefully.
>
>As for the edge of being on the floor, I'd say that if you are extremely
skilled
>and extremely active, you can turn trades very quick with very little
>slippage--but that requires you to be a big part of the liquidity of the
pit you
>trade in all day long. You earn that tiny edge. By adding liquidity
constantly,
>you earn the right for people to 'see' your orders first and think of you
when
>filling orders first. But that edge has gotten so slim these days[And here
I
>agree with you about looking for other venues to trade]. When I first
started
>trading on a phone to the currency pits, we were doing something called
'class
>B' arbitrage through a few brokers. Basically, we were locking in the
different
>in price from where the IMM was trading a currency and where the cash
market was
>trading it. In 1981 or 1982, you wouldn't dream of even booking a trade
unless
>the arb spread was at least *50* IMM points. Risk free. Now, those spreads
are
>basically zero. So these days, the floor traders work very hard and trade,
>although a different style than longer-term portfolio trading.
>
>Best,
>
>Tim Morge
>
>
>
>Neal T. Weintraub wrote:
>>
>> Just because slippage is less, you are on the other side of more trades
than
>> you choose to be.
>> The money is ours. Nobody I know considers it monopoly money. People here
>> will kill you for a tick if they think they have the edge.
>> We do not have the luxury of back testing or using the indicator or the
day.
>> As a software user, many of you can trade any market you want. I am
seeing
>> that many of the users are Futures traders.
>> Why with so many products out there and obvious gimme trades in the stock
>> and mutual funds I wonder why the public loves a game where they have a
>> better chance of reaching Bill Clinton this afternoon than making it
>> trading commodities.
>> It was too bad that the recent Wally World convention held for T.S. users
>> concentrated on Futures. I feel that many of the celebrities there could
>> have included stock and mutual fund traders.But then again, you can't
sell
>> back testing to many stock and mutual fund traders.
>> So what is more important selling software or the financial well being of
>> your clients.Tough choice.
>>
>> -----Original Message-----
>> From: Bob Fulks <bfulks@xxxxxxxxxxxx>
>> To: LCranston <mulligan@xxxxxxxx>
>> Cc: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
>> Date: Monday, July 20, 1998 4:28 AM
>> Subject: Re: Floor trader Study
>>
>> >At 1:15 AM -0400 7/20/98, LCranston wrote:
>> >
>> >>Being a market maker is very different than trading your own money.
When
>> >>trading the banks money or any other institutions money it is more like
>> >>monopoly money, and there the decision process is much less stressful
than
>> >>if it were your own money. I think the same would hold true of a floor
>> >>trader as opposed to an off floor trader with the exception that in
both
>> >>cases the money you are trading is yours. You have the same sense of
>> >>awareness that you are risking your money, but as a floor trader your
>> >>order execution is much quicker and with less execution costs and less
>> >>slippage.
>> >
>> >
>> >I also formerly invested millions for my employer and it definitely
seemed
>> >like monopoly money. So now, I continue to mentally think I am investing
>> >"company money" just like I always did, even though I "own the company".
It
>> >seems to totally eliminate the psychological barriers to trading that I
see
>> >discussed on these list from time to time.
>> >
>> >Bob Fulks
>
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