The power of the 'Low' & 'high' Tick in Trading.

For anyone not familiar with the term a 'Low tick' or a 'high tick', It is the act of a trader that deliberately 'low balls' a bid, or 'high balls' an offer to give the illusion that a price is trading determined to see how the market reacts to such a price change. An Example of which is the Bund price is 127.00/01, 580 lots on the bid and 5 lots on the offer price. A trader who is short, looking to trigger stops, or simply looking to determine price discovery once that new price is traded. The Traders' low ball doesn't not necessarily have to be a new low of the day, new low of the month or contract, simply a new price in any series. This was widely used in eras gone by, and with no rules to combat such activity, was a tool used by traders all day and everyday, in EVERY product whether on the floor or screen. Dating back to life where Clients would reference FXFX from Reuters, or even worse Ceefax FX rates. In fact Low ticks are not just for Futures, When GBPDEM was a thing, you would get on a break "figure given", "85-95" " given " 70-75" " given" "need a rate, need a rate" "figure bid. Need a price, 10-20. Paid"..

The low, and high of the day really matters. I personally prefer referencing Highs and Lows of any contract relative to it's volume traded at that point, referencing how and where other highly correlated products where trading at that point, How curves were trading, how General Risk on/off was trading, and understanding the Monetary policy conditions were in play at the high or low.

But, that's me.

Dating back to the dinosaurs from the Exchange floors ( only kidding, I'm just as old if not older ), If the price of Gilt was 92.70/73, a Trader would ( for what ever reason he had ), he would sell a 1 lot to the nearest 70 bid. This would register a 70 trade on the ticker, But the etiquette was to offer 1 lot at 71 or 72, giving the lucky receiving of the 70s, to make a whopping ￡20 or a 'Tenner'. More importantly, the 70 price is now officially recorded, which may trigger stops, and slowly feed back to traders around the world, who would then react to the new data point. So now, market is 70/71, giving the illusion that the market is more offered than it really was. As a local trader, and you fancy a pint and burger and chips at Deacons, you may fancy taking your ￡10 or ￡20, and get out the door and finish for the day!!

I would often high tick or low tick the Bund or Bobl in 25-100 lots to see the markets 'thoughts' on value. I would always have a Trade to offset the first trade to lock into a spread/Curve. If the market was on its lows, and on a 'level' ( don't get me started on those ), I would sell a random 89 lots of Bobls into the bid, and 29 lots of bund into the Bid. the reason was to see what happened to the price? Would orders build up? would the bids on the price they evaporate ?

During the noughties ( 1998-2009 ) the act of low ticking was part and parcel of everyone's management of ( short term )risk, determining the market's short term exposure and direction, and triggering Stops!!! I remember one NFP day, after what had been a stinker run in the markets, like a 3 month draw down. I was chasing rainbows, and to coin a phrase I couldn't find a tree in a forest. The main reason for the impact, was that small off-market trades would / could have such market impact was that the Bond markets were not 100% electronic. I like to say as a trader in the early days as product by product was victim to the electronification of global markets, we were simply liquidity providers as markets moved from 10% efficiency to 80/90 %, at which stage the big boys took over. I was quite active in the act of low balling, some would say frenetic. there used to be screams of traders around me, shouting at the constant price ticker. My view was it was simply adding and reducing my exposure.

One of my career mentors was a legend called Ralph Goldenberg, who sadly is no longer with us. He was owner of the CBOT and Eurex's biggest volume client ( for many years ) Goldenberg Hehmeyer. Ralph, Chris, and Larry Shulman were pioneers of the paradigm shift in floor to screen trading. When I say we were number one volume, I kid you not. I was no2 volume guy at Goldenberg, and could trade 60-70k Round Trips daily in the Shatz Alone, and I was number 2 in volume by a long shot. There is a tip in this article who was number 1. Ralph was awesome in that he hired traders that he believed had something in them to succeed, you did not have to be a Maths guy, you just needed a hunger to be the best version of yourself. As a trader I was larger than life, I was noisy, messy, but always willing to offer an arm around a junior or peer if they needed help. Not really sure that much has changed with that, I am definitely still messy!

As one of Ralphs' biggest traders in London I knew he was watching my risk as it pulsed, hopefully up, but more like Down and up during the course of the day.

During said aforementioned bad run, I remember having to do the walk of shame past his office, and like any decent business owner he waited for me. I remember one of his pet hates was turning a big winning day into a loser. And I was Mr Guilty of that for this infamous run. I remember his office was at the end of the trading room of 150 traders, right by the exit door. Everyone had gone, and I was making out for 30 minutes that I was cleaning my desk. He didn't budge. So I took said walk of shame and tried to scoot past him whilst he was on the phone. Down went the phone, "hey Malcolm!" in that mid western accent like John Wayne. "you got a sec?". I could have been really cool and said, no sorry. But I thought I deserve my lumps, let's get it over and done with.

Instead of a rollicking, Ralph simply said " Hey Nice sweater !", I had this awful bright bright blue sweater on, you know the type? The class of the man, He simply said, "you fancy going to NY office next week? trade, grab some nice dinner, and mentor some trainees?" I was like "yeah, I'm there"

Any how.. I got distracted a bit.. Back to low balls..

The purpose of my trip was, unbeknown to me, was to change my desk, change my environment, and snap me out of my bad state of mind. And as another Mentor used to say to me, to make me feel good about myself again.

I loved it. And even the non-stop piss taking by the NY traders about my accent, Lime disease, and 4th July, this didn't stop me loving it.

Had a bad start to the week, I had left my glasses behind, and had to borrow someone's glasses, kind of like borrowing someone's pants, only less helpful.

Duisenberg was on the wires all the time back then, and in a world with no sqwarks, very little news in general, the first 4 days were kind of like 4 steps forward, 4 steps back each day.

Then came NFP / Employment Day. I really needed to pay for those Burgers. So took a long walk around the station area to clear my head, no point showering as I smelt like a vagrant after walking past all those Smokey drains.

The number was Weak, and Bonds rallied hard. I had a model at the time that I would take on the last 10 % of any move. SO, I started to fade Bobls, shatz and bunds. the Office Risk manager was joking with me and said ( with my one positions all one direction ) "At least you got on the right ratio Malcolm!"

I was 5000 short Shatz, 2500 short Bobl and circa 1000 bunds short. It was a trading environment when Bonds would trade opposite to Equities, and Equities were dumping. Oops.

Suddenly Equities turned, and I got my mojo back on. Suddenly I became a machine, a Malcolm Machine. As Equities ticked higher, I began low ticking ( model ) hundreds of Bobls, shatz and Bunds. Size wise, I would alternate 50s, 25s, 13s, 1s. I was hitting the mouse as fast As I could go, and bidding the 'low tick ' volume on the price below. I calculated, On that down move I had 'low ticked' 17k of Shatz, Bobl, bund futures in the space of 25 Bund Ticks, 12 Bobl ticks, and 4 shatz ticks.

Long Story Short, took off shorts, made money. BUT, most importantly I had reset my approach to the markets, reset my own confidence and belief in my abilities, reset my PnL, and hopefully it went some way to thank Ralph for the faith he had in me.

Maybe not with same frenetic velocity, This was happening all over the globe in trading rooms. Today, I am glad that we trade in a highly regulated environment where any such behaviour is deemed illegal, and I applaud that.