Scalper's Forum

[traderwiz]

Models that we could build......Here is a good start.

1) Anomalies: Are anomalies end of day or intra day?
2)Data: What is the data to be used?
3) Trend and unit Root Tests
4)Lets try to use Univariate ARMA_GARCH Modelling.. Any statisticians / or Math guru's from IIT here?
5) Volume Model
6) Intraday Model
7) What are the evidence for a bull or a bear market?
8)What would be the evidence for a change in the market micro structure?

 

[traderwiz]

How about this:

Lets calculate the Beta of a stock over a historical period of time. Next we have to calculate the Beta for the NIFTY Index. Next we have to find out the correlation coefficient to see whether it is positively or negatively co-related historically. Now we have to have systems to monitor this in real time for pretty much all the stocks. Any time there is a distortion or 'inefficiency', then you take a position.

This is of course very simple and basic idea. Like that pdf document said, even simple ideas work. The idea itself is not really that important but the instrument that you are trading is very important. Perhaps some one can find a link or a software for calculating the beta for all stocks and the index. Then we can compare and do some number crunching...

 

[chintan786]

How about this:

Lets calculate the Beta of a stock over a historical period of time. Next we have to calculate the Beta for the NIFTY Index. Next we have to find out the correlation coefficient to see whether it is positively or negatively co-related historically. Now we have to have systems to monitor this in real time for pretty much all the stocks. Any time there is a distortion or 'inefficiency', then you take a position.

This is of course very simple and basic idea. Like that pdf document said, even simple ideas work. The idea itself is not really that important but the instrument that you are trading is very important. Perhaps some one can find a link or a software for calculating the beta for all stocks and the index. Then we can compare and do some number crunching...

Hi As far as Beta values are concrened u can find this frm BSE... here is the link for the same..http://bseindia.com/about/abindices/betavalues.asp.

For Nifty u can find this by using excel....if u have Nifty closing data of ur required time frame.... i really want to know how it can help in Scalping..althought i had readed ur Index minus stk plus story....

for ARMA_Garch... ( Auto regressed moving averages).. u can use A software name EVIEWS..... it is available in all torrent sites..

U don't require any IITIAn for this.... they are also normal human beings...

 

[oilman5]

excellent write up trader111!!!!

 

[traderwiz]

Excellent post trader111. You are in the right path. You talked about market depth. When I worked with a proprietary day trading firm in New York City, there was a group in my company that only specialized on NYSE stocks. I had the opportunity to sit with them and talked with the head trader about strategies. All they did was "read the tape" for price patterns. Of course, like you had mentioned, this game on NSE is a little bit different since there are no specialist involved unlike the NYSE. So in my opinion watching the bid size and the ask size is very important. But again, there is no holy grail or magic formula here. This is where it becomes like a poker game. Is the bid size and the ask size telling the truth? or is it fake? I have heard that professional poker players are also very skilled in day trading since it requires a very similar mindset and skills i.e. in poker you need to figure out "is he bluffing? or is he telling the truth?", same thing right here when u look at this market depth the million dollar question is "is it telling the truth? or is it faking?" So how can you tell this? This is where experience comes into play.

So is it humanly possible to watch 50 stocks for market depth? I don't think so. I think you have to specialize here. Just like you have a brain surgeon who just works with brains. You cannot walk in and trade reliance one day and ongc the next and some thing else the day after unless you have some kind of a system that can read and analyze this market micro structure. These are all hidden clues. Like sherlock homes trying to find clues to solve a mystery. We traders have to solve the puzzle if you want to be good at this game. But some times, the bacteria and other DNA is really not visible to the naked eye. Thats why we have the microscope. So should we take a microscope and look at a one minute bar for some kind of hidden patterns?

 

[traderwiz]

Also trader 111: I have also seen trading groups that only trade the news. i.e. every day there is some kind of news. It's not the news itself. Trading is about how you react to this news. Thats what counts. Right now there was news this past friday that inflation was 8.75% in India. This is bad news in my opinion since this is an all time high. So should I short the NIFTY? or should i go long the NIFTY? How would the majority of the people react to this news. How come the market had a good support on Friday when there was this bad news? I know I am trying to ask a reason or find logic. The market is always right and I shouldn't be asking any questions.

 

[sanx]

So is it humanly possible to watch 50 stocks for market depth? I don't think so. I think you have to specialize here. Just like you have a brain surgeon who just works with brains. You cannot walk in and trade reliance one day and ongc the next and some thing else the day after unless you have some kind of a system that can read and analyze this market micro structure. These are all hidden clues. Like sherlock homes trying to find clues to solve a mystery. We traders have to solve the puzzle if you want to be good at this game. But some times, the bacteria and other DNA is really not visible to the naked eye. Thats why we have the microscope. So should we take a microscope and look at a one minute bar for some kind of hidden patterns?

Hmmm , what If you don't get any news at all, you are stuck ? . Also I believe if you are able to understand the basis you should be able to trade any stock for that matter . Its like driving a car , if you can ride in roads of mumbai, you should be able to ride some other car at some other place like Delhi or US of a ,as long as you know driving . Right ? no ? . I am/want to learning proper driving ,so that I can drive any where .

 

[Cactus]

haath bhar ke fasle ko umar bhar chalna pada.

Making a bridge over sea is easier than intraday........

(that is what I could understand after reading the thread)

 

[deb99891]

carry on trader111
i am learning from u
looking fw for ur next post

 

[traderwiz]

I don't usually come online on weekends, pretty happy that I read this

Wiseguy, you have been talking all the time about Simons' hiring style, beta, correlation of NF with DOW, anomalies, unit root test, GARCH, change in microstructure ! ok I guess u use this stuff for ur scalping.

If you can predict how far the news (impact) is going to take ur ticker why to bother about what order book tells or what the tick graph tells? hmm... looks ur scalping style allows u enuf time to do 'analysis'.

Or maybe. Wakeup.

It's all about gaining an edge. Whatever gives you "an edge" you do it. If you have read Market Wizards book (part I or part II) you will know that there are all types of
traders and all sorts of techniques.

My point in bringing up all this is to show that:

1) Even James Simmon's hedge fund they do intra day scalping or what is known as "high frequency trading". Yes, they have all those complex models. Thats institutional.

2) On the other hand, i.e. at the retail level, I have witnessed a high school drop out but a pro in video games, make money every day scalping. He doesn't know a thing about standard deviations or correlation co-efficient.

3) I have worked for proprietary day trading firms during the internet boom (way back in 1999) and have seen many scalpers make money. Within the same company, I have seen different trading groups. They all do different things. My roommate was also a day trader once and he traded just the news. He also only scalped the NYSE stocks. I have seen people reading only the depth of the market and trading and making a living.

The whole point is this: what works out for you may not work out for me. Pete Sampras was a serve and volleyer. Agassi was a base liner. They both were professional tennis players. Imagine Agassi trying to "duplicate" Sampras or vice versa!!!! Wouldn't that be insane?

Trading is very similar to professional sports. You have to identify what suits "you".

I used to be a tennis pro and once had the opportuinty to teach a famous hedge fund manger. I carried steve nisson's "candlesticks" book and he laughed at me......And this was a guy who used to work for Soros. His approach was purely statistical and mathematical.

I also know many people who use candlesticks and are profitable. There is no holy grail......