presentation trader's trophy workshop capitant gent
TRANSCRIPT
Workshop Traders Trophy By Michiel Lescrauwaet & Lukas Lambregt
What is Market Making?
Market Makers
• Maintain liquidity and assure a fair and orderly market
• Capture profits through relatively small spreads (=> example)
Example
Assume:
1) Market maker has Apple stocks and cash at hand
2) Bid/Ask spread Apple: $112/$112,30 (for the sake of simplicity)
Now:
Client wants to sell 1000 stocks in Apple. Balance market maker: -$112 000
Market maker hopes to get a buyer real soon (market risk)
New ‘best ask’: 112,25.
Another client buys 1000 stocks in Apple at $112,25. Balance MM: +$112 250
Conclusion: Market maker makes a profit: $250
Market Makers
• Maintain liquidity and assure a fair and orderly market
• Capture profits through spread and position in the market
• Market risk for a brief amount of time
• Compensated for this risk by charging commissions and fees
The Traders Trophy Platform
How to flow-trade
• First hour: discover the trend
• Start with a small position until you have
a better understanding
• ‘the trend is your friend’
• Support & resistance levels
• Read the news and extract the signal
from the noise
• Avoid the electronic market (expensive)
• Cut your losses, if any
• Don’t break your position limits
Calls • Take care of your clients
Ø Answer ALL the calls
Ø Give good quotes
Ø Small spread (0,01-0,1) use
Ø Not so profitable but your goal is to keep your clients happy
Ø Keep the lines open
• Call other brokers or traders (semi-finals)
Ø Lower transaction fee
Ø Wait and see (cf. example)
• When brokers call you and you want to
Ø Buy: increase your price( )
Ø Sell: lower your price( )
Ø Manage your risk: widen spread ( )
What would you do? Buy/Sell
• Sell shares to BOA for 208.92, market price = 208.99 à No Go!
• Buy shares from BOA for 209.41, market price = 209.34 à No Go!
Ø The best trade might be no trade
Assessment Profitability (33%)
• Actual profit
• Return
• P&L volatility
• Limit usage
Risk profile (33%) • Limit breaking
• Risk control
• P&L volatility
• Trading volatility
• Number of trades
Trading (33%) • Speed
• Client Focus
• Market making
• Number of calls
• Clients response
• Cut your losses, if any
• Start with a small position until you have a better understanding of the market
• Write down your key stats (semi final): P&L, latest trade, position, market price
• Don’t break the position limits (number between brackets)
• Call as much as you: be a market maker, not a market taker
In short
• trade enough (100-200 trades)
• Keep the lines open
• It’s not all about P&L
• Practice a lot (multiple accounts)
In short (2)
Good Luck!