Scalable Trades

gmanGilbert Mendez's (Gman's) Blogs7 Comments

Over the last six months or so I have reflected back on my trading and have changed my style a good chunk. I have realized that as part of my development to become a bigger trader I have to focus a lot of my energy on trades that are scalable when the market permits it.

I can’t tell you how many times I have said or heard from other traders “I had the right idea but I got wicked out”. Or how is it that the stock went up four points, I bought the entire time and I am still negative?

I have been there many times. But looking back at my work I have realized that this often happens when I am either chasing a stock or I am unable to give the stock the proper risk it requires. Or most likely I was just thinking about that short term trade and have passed on the bigger picture idea.

Don’t get me wrong. There are days like two Fridays ago when the news on GS hit the wires when trading by the ticks made perfect sense. Momo trading rules in those situations. And thus having the skills to trade in that volatility is priceless. But what about the other 80-90% of the time when the market is relatively tame and you have to trade ideas?

If you are new trader you have to develop the execution skills. You have to be able to read the ticks. You have to learn how to trade into a position. You have to learn the algos and how they move/manipulate the stocks. This obviously helps on days of extreme volatility, but also helps you minimize your risk when you are ready to make the transition into the big picture plays.

This is my focus these days. As part of that development before putting on a trade I always ask myself these things:

1. Is the structure of the day such that I can comfortably sit on positions all day?
2. If I make a short-term trade am I looking to generate cash flow with little risk or by doing this am I passing on a bigger picture trade?
3. Is this a scalable trade? Meaning, if I ran a 50Mln book could I make this trade in the future?

Just wanted to throw that out there. Just some food for thought for those of you traders who have the skills and are looking to take things to the next level. Welcome any comments.

7 Comments on “Scalable Trades”

  1. Since I’ve built my book up to 50mln, I’ve definitely had to change up my trading style.

    I’ve actually been doing pilot positions on a swing basis with a wider stop just so I can get a feel on how it moves, and if I don’t like it, I cut with less of a loss.

  2. Since I’ve built my book up to 50mln, I’ve definitely had to change up my trading style.

    I’ve actually been doing pilot positions on a swing basis with a wider stop just so I can get a feel on how it moves, and if I don’t like it, I cut with less of a loss.

  3. i am curious to how you have been scaling/dealing with algos. I find it a bit hard to scale into anything intra day with today’s algo environment. If you average into a stock say at $50 and $50.20, the algos will surely find a way to bring it back to the $50 mark or even $49.80. You can get fancy and do a move to move trade yet your price is ruined and commissions are a killer. As an example I’ll be gross positive yet ill trade between 10-20k shares a day.

    I have a “feel” for how they move yet they tend to bring plenty of surprises. I’m trying to get to profitability as a intra day trader but there are so many of these frustrating algo days that it is really impeding my progress.

    Thanks.

  4. i am curious to how you have been scaling/dealing with algos. I find it a bit hard to scale into anything intra day with today’s algo environment. If you average into a stock say at $50 and $50.20, the algos will surely find a way to bring it back to the $50 mark or even $49.80. You can get fancy and do a move to move trade yet your price is ruined and commissions are a killer. As an example I’ll be gross positive yet ill trade between 10-20k shares a day.

    I have a “feel” for how they move yet they tend to bring plenty of surprises. I’m trying to get to profitability as a intra day trader but there are so many of these frustrating algo days that it is really impeding my progress.

    Thanks.

Leave a Reply