How Can Retail Traders Make Money Every Day Trading The S&P 500 Stocks, futures, or Options? (part1)

How Can Retail Traders Make Money Every Day Trading The S&P 500
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How can we make money in trading the S&P 500 Markets?

If you ask any trader from Wall Street to the big banks, the answer will be buy low and sell high. No one in trading will give you the right strategy that makes money for him trading the S&P 500.

When I searched years ago in the web for the best strategy (in Futures, Forex, Options and Stocks), I found a lot of websites ready to sell their automated or manual strategies that make thousands of Dollars every month for only a few Dollars.

Let us consider that you have an automated or manual strategy that makes thousands of Dollars, do you think that you will sell it for even 100.000$? Absolutely NO!!!!

Why don’t the traders in Wall Street or in Hedge Fund sell their strategies which make millions of Dollars?

How Can Retail Traders Make Money Every Day Trading The S&P 500
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In this article, I will not show you any strategy; I will show you instead the right path to find out the best one.

I will also focus on the E-mini S&P Future market, and I will divide it into questions.  Let’s begin:

Who are the Traders in the E-mini S&P 500 Future market?

No one can answer this question, except if you have some sort of transactional level data with user identifications.

Lucky for us, Dr Andrei Kirilenko did the job years ago before he was fired from CFTC for revealing the untold truth about High Frequency Trading.

Andrei Kirilenko was a Chief Economist of U.S Commodity Futures Trading Commission (CFTC), and he got his hand on this transactional level data with user identifications from CME Group for academics research.

Then, Kirilenko published a lot of paper researches about the High Frequency Traders (HFT). One of them is “The Trading Profits of High Frequency Traders” which he wrote depending on his transactional level data with user identifications.

This new research paper from Kirilenko created a lot of problems for the HFT because he revealed some secrets about their structures.

According to Kirilenko’s research paper, there are seven categories of traders in E-mini S&P500 in August 2010:

  • Aggressive High Frequency Traders = 14 Firms.

Aggressive HFT is a liquidity takers, which mean they use only market order to open and close a position. They can even trade up to 5.000 contracts per day.

  • Mixed High Frequency Traders          = 30 Firms.

Mixed HFT is a liquidity takers and makers, which means they use both market orders and limit orders to open and close a position. They can even trade up to 5.000 contracts per day.

  • Passive High Frequency Traders       = 21 Firms.

Passive HFT is a liquidity makers, which means they use only limits orders to open and close a position. They can also trade up to 5.000 contracts per day.

  • Fundamental traders                           = 346 Firms.

A Fundamental trader can be defined as a firm that trades at least 1.000 contracts per day and takes directional positions with holding them over night.

  • Small or retail traders                        = 21461 Traders.

Small trader can trade less than 20 contracts per day (like me and you).

  • Non- HFT Market Makers                   = 737 Firms.

Non-HFT Market Makers provide at least 80% of liquidity, and trade no less than 20 contracts per day.

  • Opportunistic Traders                       = 8494 Firms.

Opportunistic trader can be identified as a firm which trades large directional positions, but not as large as fundamental trader. This type of traders are like small institutional investors, brokerage firms, and hedge funds.

Conclusion:

This is the first time we can identify the participants in E-mini S&P500 with precision.

As Kirilenko said when he published his paper in the New York Times article: “We’re not estimating, our data is excellent”.

In the next article, we will talk about this 7 participants and which one is leading and controlling the E-mini S&P500 in day trading.

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