The E-mini Trading Professor

Archive for the ‘Live Trading Room’ Category

Seems to me it was centuries ago when open outcry was mode of floor trading, and the highly efficient modes of trading we employ today were the stuff of dreams. Online trading has greatly improved the quality and quantity of trading and executing trades. But some of the problems of the old trading days still can be prevalent in today’s trading, namely, slippage.

From Wikipedia:

“With regards to futures contracts as well as other financial instruments, slippage is the difference between estimated transaction costs and the amount actually paid.”

You can find a wide range of definitions of slippage on the internet, some more esoteric than others, some downright problematic, but I think slippage is every bit the problem we experienced in the old open outcry days. Slippage occurs when you sell or buy at a specified price and your actual execution price is higher or lower than your expected transaction was planned. Even more likely, slippage can occur when you have a stop price specified and the executed stock price is higher or lower than you intended stop.

Slippage can occur for a number of reasons:

1. You are trading in a thinly traded market and there are simply not enough traders to fill orders in a timely manner.

2. You may need a different trading platform if your trades are not being executed at your named price level. Or you may need a new broker.

Whatever the reason, slippage can drain your profits if you don’t pay close attention to your execution prices and order prices.

Very thinly traded markets, say copper, often don’t have the liquidity to handle large market orders. If you intend to trade thin markets, you need to plan for some of the liquidity problems that inevitably occur. On the other hand, the ES Emini is heavily traded, and liquidity problems are not an issue, at least from a volume of contracts traded standpoint.

Markets that have a high degree of liquidity are excellent for avoiding slippage. The ES contract, for example, is one of the largest futures contracts, and slippage can generally be attributed to either human error or a systematic failure in your brokerage . More than a million contracts, some times even higher, are traded daily on this exchange and you will have little trouble getting your trades executed and filled in a timely manner. I have traded up to 100 contracts without any slippage issues. (Note: I am going to pass over any broker related issues, as there is no way to control those short of finding a new broker.(

Pay close attention to the manner in which your broker’s software fills a trade. Sometimes slippage can occur because the firms software is not “up to snuff” in the digital age and cannot keep pace with the fast moving, highly liquid markets like the ES.

For whatever reason, slippage is a real cost in your trading operation and you should do what it takes to make sure you trades are executed and filled at your specified parameters. The failure to do so will result in real costs to your trading account, which is an undesirable outcome.

I get a chance to talk with a lot of day traders on a daily basis and they often times find myself confused as to what these traders are actually looking for. My goal, as a trading educator and full time trader, is to teach people to trade in the style I think will most benefit them. I am still a full-time day trader, but I do not run a live trading room as I was under the assumption that most people want to learn how to day trade. But there is a group of people who would prefer to sit in on a trading room and have the leader of the room call the trades for them.

I don’t suppose there is anything wrong with having a third-party call your trades, but I think it would be a mistake to call yourself a day trader when, in fact, you are simply following the lead of a room trader. This is very confusing to me, and I can’t say I fully understand the thinking behind the room concept.

This is not to say that I am against trading rooms, because they are a perfect place to perfect your trading style if the room leader trades according to the style you are learning. On the other hand, if you are using a room to time your trades, what is the use in learning a specific day trading system?

I spent a portion of this weekend looking at various day trading programs and live trading rooms and it would seem the trend is leaning towards live trading rooms. If you found a room with a very capable leader, I would have to believe that a live trading room would be a profitable endeavor. However, many of the reviews of live trading rooms were less than flattering, and the lifespan of a typical live trading room, especially one not associated with a trading program, would seem to be rather short. After all, in the absence of learning to trade you are completely dependent upon the judgment of the trading room leader.

In my world though, I would want to know how to day trade. There is no reason for me to be dependent upon another individual to make a living. I prefer to make a living using the skills and knowledge I have developed over a lifetime of trading. This feeling gives me a sense of independence. I am not beholding to another trader to earn my living, and if that particular trader moves on to other employment opportunities, I am still in a good position to earn a great living.

I had to ask myself though, why are people gravitating to trading rooms instead of actually taking the time and effort to learn how to daytrade effectively? I can only surmise that many people are unwilling or unable to devote the time and effort it takes to become a competent trader and take the easier route of following an already confident trader. This begs the question though, how will a novice trader ever become a full-time trader when he or she is dependent upon the trading calls of a third-party trader? My opinion is that their career would come to a screeching halt. As a matter of fact, there were a whole slew of traders who depended upon a very charismatic trading room leader who, for unknown reasons, seem to experience a sort of meltdown in his trading style. This trader, who was popular in the early 2000’s, begin a series of unusual and bizarre actions that cost many traders a large amount of money.

But here is my question; had these traders known how to trade on their own they could have continued trading very profitably without their trader guru at the helm.   Apparently in this particular situation millions of dollars were lost, and in my estimation it seems rather unnecessary.

The purpose of this article is not to bash trading rooms, but to use trading rooms to enhance your own trading abilities. I believe it is imperative that anyone who is actively trading have a time-tested system they utilize. Without a system, and without plenty of experience with that system, you are literally at the hands of another individual who you may not know and may not fully understand the methodology he or she is trading. I recommend learning how to trade, then utilizing a trading room if you feel it is necessary. I doubt you can learn a system by starting out with a trading room, you must have a foundation to begin with.