Chat With Traders1h 12m
I Was the Algorithm Before Algorithms Then I Had to Start Over · Scott Pulcini
Scott Pulcini, Dr. Brett Steenbarger, Kevin
Interview, Webinar
- Specific trading windows between 10:15 and 12:30 Central are identified as periods where significant financial losses have occurred, leading to an expectation that trading during this timeframe should be avoided.
- Historical order book data has been removed by the CME to protect the interests of major commission-paying clients, preventing traders from viewing house numbers and order book details from before spoofing was illegal.
- The current market environment is dominated by algorithms that execute trades and cause price pullbacks after large orders reach levels, with algos also snapping prices back based on movements from the previous five minutes if the market moves too far too fast.
- Market conditions characterized by relative volume under 100 are predicted to result in choppy whipsaw trades, while volatile markets without an understanding of Average True Range (ATR) are expected to stop out traders via random rotations almost 100% of the time.
- Price movements to gamma exposure (GEX) levels are expected to act as magnets due to dealer hedging requirements, and prices are anticipated to move out of balance areas specifically to force wrong traders out of positions.
- Options flow is predicted to account for 95% of daily trading activity with only 5% involving program buying or selling by large funds, a dynamic expected to frequently stop out traders through options manipulation referred to as being "heroed."
- Headline trading is described as the most challenging period in a 25-year career over the last year and a half, with predictions that insider knowledge exists allowing some entities to know headlines 10 seconds before public release.
- Traders breaking even over the past year and a half in futures are considered to be performing well, whereas those relying solely on trading without other income sources are expected to fail due to the inability to afford losses.
- To manage risk during adverse conditions, a daily loss limit of 6% of account size will be enforced via automatic shutdowns, and trading activity ceases for the day after four or five consecutive losses when the market environment is not functioning.
- Trading size is planned to increase to 2, 3, or 4 times normal levels only when a trading thesis aligns with real-time volume events, while iceberg orders below thresholds of 700 lots for E-mini S&P or 150 for NASDAQ will not be traded.
- Complacency is identified as a barrier to trader growth, and traders who keep P&L visible are expected to transition to panic trading by thinking in real-world financial terms such as car or house payments.
- Smart traders from professions like physics or law are predicted to struggle because their need for logical explanations for market movements will be futile, while traders lacking external firm-imposed shut-off limits will be unable to control themselves when on tilt.
- It is expected that every trader will experience a blowout day regardless of skill level, and if a trader does not feel a trade continuing despite a sharp move ("ripping up"), they should anticipate that the outcome is unpredictable and the opposite side might be the better position.