I had a new idea for a C2 system last night and wanted to get some feedback, as well as, see who would be interested in test trading it with me for FREE. You will see why, if you read on.
Letâs call the system âFeeding Frenzyâ or âTrend Makerâ or âChain Letterâ.
The system is simple, it aims to create short term (1-5 minute time scale) market demand/supply by sequentially placing buy/sell market orders. Once the demand/supply is created, it then closes the position for a profit, by âselling/covering into strengthâ.
The idea may actually only âworkâ for real, since you cannot create demand with a hypothetical market order, only a real one.
The available avenues for C2 autotrading (Gen2 and Gen3) are also potentially a requirement, as they allow many people to approximately synchronize their ordering activities from all around the globe.
A real example of the proposed system approach;
1. Trade E-mini index like the S&P (ES).
2. Read the short term market trend as either long or short (I can use my VP Trader signal for this, which typically finds a trend before 10am).
3. Once the trend is confirmed, begin to place sequential buy (for long) orders separated by 10 seconds each. If we say the typical lag time for C2 orders is 1-5secs, 10sec intervals would create a near continuous stream of marker order buys from around the globe, yet synchronized, creating demand and driving the price up.
4. The system would make 10 sequential 1 contract trades (1 every 10secs). Each autotrader can decide how many contracts they want to trade, but it would need to be in increments of 10 (10, 20, 30, etc.), traded at either 100%, 200%, etc, scale.
5. At the end of the buy cycles, the system would place more rapid sell orders (2 every 3-5 secs) to close the position for an average profit of maybe 1-2points.
6. The more autotraders that trade this system, the more likelihood of it working, since we would be relying of everyone else to follow our lead or to join the âFeeding Frenzyâ.
What would the testing approach look like?
1. Iâll take everyoneâs feedback, finalize the approach, and do all the work to program the system on C2 and offer it as a FREE system.
2. We need lots of autotrading subscribers ready to trade the minimum number of contracts.
3. Hit go and try it.
What might the risk/reward be?
1. Iâm thinking if we buy/sell 10 contracts of ES in 2minutes, we at most lose 1-2 ticks plus commission or $225-$350 per day (assuming Gen3 autotrading at $10 per contract).
2. Iâm thinking we can move the price by 1-2 points, so maybe $400-$900 per day.
Ok, feedback please. I like it? Itâs a dump idea? Itâs illegal? Itâs against C2 policy? Iâll do it? Etc, etc.
Jim
Probably not legal. You are attempting to manipulate market prices by coordinating orders. Ixnay.
Jim,
If your idea is correct, wouldn’t the sell orders drive the price DOWN just as the buy orders drove the price UP?
Basically it’s a wash, leaving only the commissions and spread to put money in the brokers pockets.
You are speaking about “short term market maker”.
it won’t work with liquid futures, because: 1. there are already guys who implements the approach on large scale and without outside capital. 2. Time frame for driving a price on the kind of instruments is milliseconds. Not minutes (smile)
Eu
The idea would be to seed or catalyze demand, so that there is excess demand to close the position for a profit without producing excess supply.
I also think that trying to go with an already establishing trend may help. For example, today the trend was clearly short at around 9:30, so selling into that already existing trend would have just accelerated the drop and likely resulted in a 1-2 point profit on the 10 contracts.
You are right, if the demand that we create was the only demand in the market.
Jim
does anyone have an opinion of legality?
is "short term market maker" a c2 system?
yes, I read about this type of idea sometime ago in the forex market. I believe the company that developed it was bought by citibank and it did use outside captial, but not sure about the time frame.
I still wonder if it might work, even with ES. I was testing a short term scalping system with live trades and it was surprising the effect even 1 contract may have on the bid/ask. Would this system work best if it traded on a volume dip?
Now we call it, Trend-Following-Volume-Dip-Feeding-Frenzy
Jim
I watch a "guru" who uses "pump and dump" approach in illiquid stocks. Simply, he makes a position before releasing a signal to his followers - "pump" and exits on followers wave - "dump". He is legally making impressive percentage for himself on the schema. The percentage is used for advertising of "correct"/100% right decisions and for improving followers base. The story is going on for last few years with selling DVD and courses kind of "how to choose right penny stock" for followers and of course signals (smile) Absolutely legal business (double smile).
Eu
try it (smile) You have some chances on illiquid stocks and practically no chances in liquid futures.
Eu
It might be a matter of disclosure, but I thought that (pump and dump) was not legal. I get a few SPAM emails about penny stocks that are essentially trying to do what you are talking about.
With the system I’m talking about, the first-in advantage, would be small (if any), since the time frame is so short, plus, I think the multiple sequential orders may be critical with a liquid vehicle like ES. The system would also provide a means of short term “averaging down” if the price was to drop during a buy, thus reducing the overall risk, as well as the first-in advantage.
I would like to, but it would be nice to have some support from other autotraders, since I think the system would only work for real, not hypothetical.
I suppose the hypothetical system will at a minimum expose some of the inherent risk.
who wants to try it? Did it get real quite all of the sudden?
Jim
pump and dump isn’t not legal. Selling signals might be legal. There is very thin gray area of legality.
>since the time frame is so short
I’m trying to explain you that few minutes of driving price in ES is huge loooong time frame. People is fighting for milliseconds there and without outside capital.
Eu
I hear you, but I was thinking more like 60-120secs total round trip time, but it could be shortened to 30-60sec. As long as the C2 server is sending first in first out, the 30sec-120sec time frame would be enough to complete the trades.
That is still quite a few milliseconds (30000), but not a few minutes.
If you are willing, can you add a bit more to your opinion about timeframe? I’m not trying offend you, just wondering about where it’s coming from, etc.
Jim
I’m looking at the bid/ask for es now and there are over 1,000 contracts on each side with a spread of 1 tick. It would take many hundreds, maybe thousands, of contracts to start to move that market. And then of course, you have to get out with a profit.
correct.
And even with few K contracts you might become market maker in ES for relatively small amount of time - 10-20-30 milliseconds. And exit is pain in a …
Eu
We would specifically place market orders, which would give-up the bid/ask spread and influence the market makers to move their bid/ask higher to collect more profit or to cover their potential loss in the case of a rapid price movement.
The 1000 contracts on the ask is a market maker, while it is possible that someone may place one order for 1000 contracts, what actually happens is that 100-200 go through and the ask gets moved, unless there is equal buy/sell pressure.
While the proposed C2 system will maybe in total trade 1000 contracts within 60secs or so (100 subs with 10 each), it will be 1000 market buy orders in 60secs from all over for 1 contract each, not just one buyer.
In addition, we want to catalyze more price based trade action, so hopefully it will be more than 1000 contracts.
Jim
1000 contracts is ~3 millions only on intraday margin. Realistically speaking you would need at least half of a contract in cash. It makes necessary sum ~25 millions. And it’s only entry point, because 1K contracts is nothing in the world. I would believe you can buy C2 for less price than just real entry ticket to short term market making in ES.
Eu
P.S. Of course it’s only my 2c. You can try it yourself. The market is open for anybody.
sorry, forgot to add that the kind of trading is going on from CME/Globex chairs with commissions that is not accessible for retail traders. I’m not even speak about technical infrastructure. (smile)
Eu
Anyway, you can try (double smile)
Maybe ES is not the best option, what might be a better option?
Jim
This would never work. This is basically what the high frequency traders attempt to do: you have to have a box at the exchange and find a low liquidity stock.
