Newton Linchen had read my mind. Recently I am toying with the idea of shifting to Index futures. Trading in individual stocks I may be at a disadvantage due to informational asymmetry. Company managements are accessible 24/7 to large funds. I have witnessed how the inner circle operates when I am a sell side analyst in a brokerage firm. The only hesitation in my mind of the suitability of Index futures to a retail , independent trader is Institutional activity in Index futures for purposes of hedging and arbitrage. Is it possible to a retail trader who is doing predominantly directional trading not to be overwhelmed by the Basis ( discount / premium to the spot index). Does the independent trader has the necessary skills to combine it with Index options for proper hedging. Where as apparently it seems individual stocks show a clean trend ( sometimes!)
Insider trading is what made me turn my trading activity to index futures and to market microstructure. I don't depend on large moves to make money. I really don't care were the car is going - and what car is, who is the driver, etc - for I'm trading on its mechanics, it's engine, it's structure.
For example, my day target is 30% of the day's bar range. Achievable and reliable.
Regards from Brazil!
Newton Paulo Linchen
Insider trading is what made me turn my trading activity to index futures and to market microstructure. I don't depend on large moves to make money. I really don't care were the car is going - and what car is, who is the driver, etc - for I'm trading on its mechanics, it's engine, it's structure.
For example, my day target is 30% of the day's bar range. Achievable and reliable.
Regards from Brazil!
Newton Paulo Linchen
1 comment:
Dear Professor,
Namastê.
Honoured to be mentioned in your post.
About your question: it is - at least in Brazil - for the retail trader to perform well in such arena of index futures.
First of all, there is the "easy" path of the mini contracts, ideal for the undercapitalized trading as well for to put some new ideas to work in the markets with low exposure.
When you go to the "big" contracts, you can count on the institutional hedgers and arbitrageurs as LIQUIDITY PROVIDERS, (Market Microestructure - an idea from "Trading and Exchanges".
All "mean reversion" traders, all arbitrageurs, all "pairs trading" traders will act as liquidity providers for the DIRECTIONAL TRADER.
I myself am a directional trader. Always been, and perhaps always will be.
What one must understand, however, is that index futures may contain more intraday noise, but, as a good side effect, it is more influenced by international environment (such as Gold and Bonds trading), wich makes it easier to trade in the context of a CORRELATION STRATEGY.
And, as a benefit, the LEVERAGE acts to smooth VIG and SLIPPAGE.
Regards
Newton Linchen
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