For
Moderator:
Online Trading Academy
John ODonnell, CKO
Probability
Risk
Leverage
Futures
Forex
Options
Most novice traders have this list in
reverse order!
Online Trading Academy 2013
Intense scrutiny on market structure turns to payment for order flow (PFOF). Yesterday, Charles Schwab spoke out vehemently against high
frequency trading (HFT), sustaining the intensity of the debate on HFT and market structure overall. And it appears with the spotlight on
rebates/maker-taker model, the market's focus turned to payment for order flow (PFOF) of the eBrokers. The two eBrokerage stocks that we
suspect have the highest exposure, AMTD and ETFC, were down 5.3% and 6.5%, respectively. SCHW, which we suspect has the lowest as a
percentage of PFOF to total revenues, was only down 1.9%.
eBroker PFOF Summary ($ in mm)
Source: company documents and Sandler O'Neill
(A) ETFC actual FY13 Order Flow Revenue
(1) Sandler O'Neill estimate of Payment for Order Flow Revenue for SCHW
(2) Sandler O'Neill estimate of Payment for Order Flow Revenue for AMTD is a range of 15%-17.5% of total net revenues
But stocks appear to be pricing in PFOF is going away, which may or may not be true. eBrokers state that PFOF helps them to offer low
commission rates and superior execution to their retail customers. AMTD reports that its clients received price improvement on ~90% of all
marketable and limit order trades (100-1,900 shares) in 2013. SCHW reported similar if not higher percentages of price improved trades.
Therefore, while we suspect PFOF will be part of the comprehensive, holistic review of market structure the SEC is committed to doing, there are
no guarantees a complete overhaul or even a partial overhaul of the PFOF system will be mandated. Therefore, given the decline in the
eBrokerage stocks yesterday, we believe they have reasonably priced in their probability weighted exposure to PFOF regulation.
Even with Chuck's letter, SCHW does not intend to forego PFOF. In discussions with SCHW, they believe HFTs more or less interact with all the
flow out there, so it may not be possible to avoid them. Their primary concern with order routing is to provide the best execution for their clients.
SCHW makes a distinction between market making/wholesaling and HFT, which they believe is more a proprietary trading strategy
7. Financial Freedom
John Bogle, founder of Vanguard, exposes managed funds. Assuming a historic 10% annual market return, lets look at how the investor would make out.
With an initial investment of $10,000 for 50 years at a 10% annual return, the investor would grow his account to $1,170,000. However if you take out fund
fees of 2% a year it leaves the investor with only $470,000. what a difference paying someone 2% can make!
@85 $148,780
@85 $32,465
After Fees
@65 $31,920
@65 $11,127
S&P 500
2000-2013
Our Grads
knew a crash
was likely
ARE YOU
READY?
2011 Results
54 days (21%) of
the time they
made over 100
Million Dollars
S&P 500
Institutions take on
more risk in a down
market. Retail
trader panic and
take less risk
Our Students
Learn to think like
an institution
Sold
Bought
Demand (wholesale)
Head and Shoulders Top
Double Bottom
Earnings Report
Trend Lines
Support and Resistance
News
Indicators
Cup and Handle
RSI
Pivot Points
Stochastics
Broker Upgrade
MACD
Bollinger Bands
Dow Theory
Fibonacci
Profit: $5,918.42
This is how you make money
buying and selling anything.
32
I quit my job
Samsung 55
LED TV
Demand
Bought
Human Emotion
Supply
Who is buying
here?
Who is selling
here?
Demand
(wholesale)
The Logic:
The amateur/novice trader buys at retail prices and sells at wholesale prices.
The professional trader simply trades with amateurs
Demand
Investor Uncertainty
USA Today
12 Point
Decline
The Setup
The Result
XLT Buying
OTA Demand
(Institutions
Buying)
$937.50
MC Demand Zone
(Institution Buy Orders)
The Profit
The Setup
47
Students are
instructed to
BUY
XLT Demand
The Result
XLT
Demand Zone
Students Buy
The Result
XLT Supply
XLT Demand
Target
Reached
Sold Short To
Novice Buyer
Day Trade
Profit: $955.00
Not Supply
The Result
Trap
XLT Demand
Globex Low
XLT
Entry (Buy)
55
Sep. 2012
Realized Gain:
$173,000
Sep. 2012
Unrealized Gain:
$125,000
Demand Zones
Demand Zone
2011 Performance
2011 Market Top Call Live in XLT
S&P Weekly Chart The Top
2012
Market Top
April 3, 2012
NASDAQ
Late!
After the market falls!
Student Success
26 U.S. and 7
International
Locations
Partnered with
Industry
Leaders
Bloomberg - Asia
CBS
Fox Business
CNBC - Asia
CNBC
May 20-23rd
$299
Break
5 Min