After 9 years as a floor broker
on the SFE, I tried my hand briefly as a local before beginning as
a private client broker at Tricom Futures Services Limited.
I was primarily an Institutional SPI broker, and as such learnt
the ins and outs of the volatility of the market.
With the futures floor due to close in October this year, I decide
to try to pass on some of my experience on to those trading off
screens. I have had experience trading both, and hope that I can
transfer some of the floor ideas to screens.
The advantage of trading on the floor as a local is immediacy
of execution. Basically it means that you can get set very quickly,
and you can also feel the emotion of the pit at the time of the
trade. However, you can also get the feel from screens, although
it does mean that you need to watch the market constantly. This
is the crux of the problem. If trading is 5% idea and 95% emotion,
it can be advantageous for the screen trader to place his order,
set take profit targets and stops and walk away.
A floor trader, or trader that watches the screen constantly,
may be prompted to trade for no other reason than to participate
in the market. This causes overtrading and a subsequent loss of
profits.
Currently, the way I advise my clients to trade is the way I would
have on the floor, with set levels and stops. But as I can watch
the screen, I can pick intra-day moves reasonably well. I can see
when a market is looking tired and about to change direction, or
anticipate an explosive move, purely from the experience of standing
on the trading floor for so long. Most of these moves can also be
confirmed using the signals from a short term, say 3 to 5 minute
charts with the appropriate RSI or stochastic studies. I would then
ring a client and suggest a strategy for a short-term trade. My
strike rate is very good at the moment. I am currently running at
7 winning trades in 10, which means that you can make money on a
1 for 1 point win/loss ratio.
It is not easy to make money every day. In fact as a day trader
on the floor limited to just 1 or 2 markets, you can be forced to
overtrade or trade for the sake of it.
Many system traders are therefore at an advantage because they
can basically set and forget. The day trader must learn when to
trade, what profit margins he is looking for and what his maximum
acceptable loss on any trade is.
You can make money day trading, there are always opportunities
in the market, but you need to be disciplined.
