I Was the Algorithm Before Algorithms Then I Had to Start Over · Scott Pulcini

Market Structure Evolution & Edge Shifts

• Scott Polsini scaled to trading 50,000 contracts daily (10% of E-mini S&P volume) in 2003, generating approximately $10 million in profit that year.
• His primary historical edge relied on "first-in, first-out" queue positioning and the ability to see counterparty house numbers, allowing him to distinguish between real liquidity and locals.
• The market environment shifted drastically around 2007–2008 following the regulation of spoofing, rendering his manual order book reading strategies ineffective.
• CME removed visibility of counterparty house numbers to protect high-commission institutional players, removing Polsini's ability to identify specific对手 strategies.
• Polsini transitioned to using CME MBO (Market by Order) data, which identifies "iceberg orders" and "stop runs" with 100% certainty by tracking specific order IDs.
• He identifies "HERO flow" (Hedging Impact of Real-time Options) from Spot Gamma as a dominant driver, noting that options positioning often dictates futures price movement rather than the reverse.

Market Manipulation & Illegal Activity

• Polsini details a rivalry with a specific local trader ("990") who engaged in illegal manipulation by crossing his own orders to create fake volume and trap other traders.
• This specific manipulator would force traders to chase liquidity and then "yank" orders, acting as a "big vacuum" that caused massive losses for competitors.
• This manipulation occurred frequently around 10:00–12:30 Central Time, a period Polsini now warns traders to avoid.
• Despite repeated reporting to the CME, the manipulator faced only a "paltry" fine and a brief trading ban in 2016, highlighting regulatory enforcement gaps at the time.
• Polsini confirms that while spoofing is now illegal, the market remains vulnerable to other forms of manipulation like the options "hero" game.

Trading Psychology & Emotional Discipline

• Polsini admits that his gut feeling, previously his primary strength, is now wrong 80% of the time due to algorithmic counter-strategies.
• He experienced two catastrophic loss events in 2004 where he lost $800,000 in minutes after his trading firm failed to enforce his $100,000 daily loss limit due to prior "negative reinforcement."
• He advocates for strict, pre-set firm-level loss limits (e.g., 6% of account size) that cannot be overridden during emotional "tilt" periods.
• Polsini recommends turning off the P&L display during trading to eliminate real-world money stress and focus purely on process execution.
• He identifies "emotional leakage" as a primary killer, advising traders to physically express frustration (e.g., talking to themselves, breaking monitors) rather than internalizing anger.

Current Strategy & Risk Management

• His current strategy is rules-based, utilizing "Scott Zones" to identify areas of concentrated volume, volatility (ATR), and stop runs.
• He trades only when high-volume events (icebergs or stop runs) confirm a pre-existing thesis derived from balance/trend analysis.
• Risk is standardized to $500 per trade per strategy, with position sizing calculated dynamically based on the specific volatility (ATR) of the zone.
• He employs "A+ setups" where he increases position size (2x–4x) only when multiple factors align (structure, volume event, and volatility).
• He advises traders to treat trading like a casino or athletic event: accepting losses as a probability of the game and stopping immediately after a losing streak (e.g., 4–5 consecutive losses).

Advice for Traders & Future Outlook

• Adaptation is Critical: Traders must abandon the expectation that past market behaviors (e.g., visible order books) will return; failure to adapt leads to ruin.
• Simplicity Over Complexity: Adding more indicators does not improve performance; successful trading requires distilling data to the most actionable signals (volume, volatility, order flow).
• Execution Over Conviction: Traders often fail not due to lack of conviction but due to the inability to execute the trade; the process must be followed regardless of feeling.
• Income Diversification: Polsini stresses that traders should not rely on trading as their sole income source, as financial pressure destroys the objectivity required for success.
• Forward-Looking Statement: Polsini warns that the current environment involves "headline ping-pong" and options manipulation, requiring traders to rely on stop-losses and risk management rather than trying to predict news events.

Biographical Context

• Polsini was featured in Dr. Brett Steenbarger's book Enhancing Trader Performance as an elite performer who recorded his trading sessions to analyze his own performance.
• He took a seven-year hiatus from professional trading (working in medical sales) before returning in 2013/2014 using Bookmap's enhanced data capabilities.
• His journey is characterized as "rags to riches to rags to riches," reflecting the cyclical nature of market advantages and the necessity of constant reinvention.