be summed up in one word:
liquidity.
Q&A
Don Bright of Bright Trading SINCE YOU ASKED
Confused about some aspect of trading? Professional trader Don Bright of Bright Trading (www.stocktrading.com), an equity trading corporation, answers a few of your questions. To submit a question, post your question to our website at http://
Message-Boards.Traders.com. Answers will be posted there, and selected questions
will appear in a future issue of S&C.
AND NOW FOR THE BASICS
Mr. Bright, I have finally put together enough money to trade live, and I’m now setting up my workplace. I have two computers with multiple screens. I recall that a while back you had some tools and setups that you and your traders were using. Has much of that changed in the last couple of years? I know there are many ways of setting things up, but I was hoping for an update.—J. Keller
Thanks for the question and for reading previous columns. Although I am not sure which specific column you are recalling, I did find enough to get you started. I’ll try to cover the basics to the more complex setups so you can determine what fits your style of trading.
First, a quick review of the basics. Each new trader at Bright Trading has a choice of using either RediPlus or RealTick, with other options available for specific uses. I’ll use RediPlus for my examples. Other data vendors have similar screens available.
The first window is what we call the basic quote monitor. This is where you can cut & paste a list of symbols into the first column (symbol). This is standard on all platforms. We like to pick and choose the columns in such a way that it is easy to determine what is happening in real time, for any symbol.
For the sake of simplicity, I’ll provide a good example of column headings and their uses:
Symbol: We generally place the indexes before individual stocks. For example, Dow Jones Industrial Average (INDU), S&P 500 spot price (SPX), Nasdaq 100 (NDX), euro vs. dollar (FXE), VIX, TICK, and any specific index you may be trading in
Last price: The last trade price or index value
Change: Price change from previous day’s closing price
Pct change: Percentage change in price.
Here is how I set up mine, and why: Bid price: Current consolidated best bid
price — I say “consolidated” to account for ECNs and other market centers. You may use “primary market” instead with some vendors
Ask price: Same as bid price, but for the best offering price
Last trade size: I like to see if this symbol is trading in small units or big blocks
Last one: The previous trade size (as a horizontal ticker)
Last two: The previous trade before the above
Volume weighted average price (VWAP): The VWAP is particularly helpful near end of day
Open: Opening price for that stock Day high: High for the day Day low: Low for the day
Volume: Volume for day, excluding premarket
Alert low: Set alerts to trigger a flash of some sort when hitting your predeter- mined buy prices
Alert high: Set alerts to trigger sell prices, or for entries after a breakout price is hit.
This is about all I can focus on here, but there are many other columns that are of value, such as ex-dividend date, amount of dividend, and yearly high and low.
Below the quote monitor we have an
order entry window. This screen has
buy & sell buttons (and sell short, of course), symbol, price type (limit or market), destination (be careful not to pay for providing liquidity when you can receive money for it), quantity, price, time in force, and probably some sort of account reference.
Everything can be done from this screen, but many use other screens like a montage. A montage will show Level 2 data (depth of market), can be person- alized to fit your needs, and have auto- updates of orders (bid or offer changes, and so on).
We also have a message monitor that shows order entries, executions, or can- cellations. This has a tab to show what you’ve done for the day, average prices, and other helpful information.
We tie our data vendor (front end) with (at minimum) an Excel spreadsheet. RediPlus has an add-in for Excel, which allows us to put together a spreadsheet that is linked to RediPlus. The data can be transferred to the spreadsheet using direct data exchange (DDE) links. You can organize all data into a spreadsheet, add in the current fair value, and have a formula for determining if the futures are trading at a premium or discount, which is helpful information. You can keep track of your trades at any time during the trading day, set up conditional formatting such as coloring the cells red or green, and much more.
I don’t have the space here to get into more advanced tools this month, but I’d love to get into how to write to the vari- ous application program interfaces (APIs) and automated execution programs, and various other tools. Perhaps next month; stay tuned.
even a first income is what gets people interested in trading futures.
Do most people who come to you already have experience trading something else such as equities, or do they want to start out by learning to trade futures?
I’d say it’s about half and half. Half of the people who approach us have some investing experience, usually in equities. But it’s not always people who trade for themselves. Most of them have financial advisors who give them advice or place the trades for them. A lot of these people have never traded futures. We also get a lot of people who’ve never invested at all when they come to us. They would have seen us on the Internet or seen me on television. To be honest with you, it’s the people who have no experience at all who are usually the easiest people to train. Why do you think that is?
It’s because they don’t have any pre- conceived notions or bad habits that you have to work through. That sometimes makes it easier.
How difficult is it for those trading equi- ties to transition to trading futures?
These days, most people — unless they have fairly deep pockets — aren’t going to be daytrading stocks. You need to have at least $25,000 if you fall within the category of being a daytrader. We Larry, we last interviewed you
for our January 2007 issue. So what’s been going on with you since then?
We’ve been around for 20 years, teaching people to trade. We’re getting ready to expand again. We now have 61 employees in three different cities. We have an office in Miami, an office in Los Angeles, and a really large office across the street from the Board of Trade in Chicago. We’ve also expanded our course offerings. We don’t just teach futures anymore. We teach options, stocks, back options, futures options, and currencies. We’ve been pretty busy since we last spoke.
You got your start trading futures. Say someone wants to start trading futures and has no experience. Why would they even trade futures?
A lot of people that we come across trade futures because they’re looking for one of two things: They’re either look- ing for a second income, that is, they are already employed, or they want to trade full-time. Trading futures gives you a lot of leverage, and that means it carries risks, just like any type of investing. There are good opportunities available in trading the futures markets. You can make money quickly but you can also lose money quickly. I think the possibility that you could have a second income or
teach people to daytrade, so when those who have traded equities start trading futures, trading those shorter time frames is a big change for them. Sometimes in futures, you can have trades on for five or 10 minutes, or even less.
But regardless of whether somebody has traded before — equities, futures, or anything — what I want to do with everybody is to first teach them our methods and techniques, and second, get them on a simulator for an awfully long period of time. That, to me, is the key. You shouldn’t trade with real money when you first start. The simulator has to be fairly sophisticated. There are a lot of simulators that work in such a way that if your desired price is touched, you get filled. But that’s not realistic, which is why it’s important to trade on simulators that are sophisticated and realistic. Why do you focus on daytrading futures instead of holding them for a longer time period?
One reason is that if you’re going to