HFT Killing Retail Traders in ES Futures - NY Times Today

[nazzdack]

Quote from Tsing Tao:
----question.
----average aggressive high-speed trader....
----who is this money coming from?

1) You have to properly take into account other losing HFT traders in the sample.
2) Was it a "biased" data sample that excluded some unprofitable HFT traders in order to produce a more "sensational" profit number? :eek:
3) A "smaller" HFT trader has much less overhead than a "larger" HFT trader who has scads of programmers and expensive office space. The smaller guy can get by with a lower rate of return on capital where the larger guy can be unprofitable at the same level.

 

[Bob111]

The smaller guy can get by with a lower rate of return on capital where the larger guy can be unprofitable at the same level.

and that was my approach and my advantage back in a day..
i can come up with idea,code it,test it and use it on some small caps,where it simply now worth it for big company to do something similar. 100K a year is enough for single trader,but simply not enough,when you have team of programmers,testers,project managers etc..take them a while,but they did did catches up..
but imo-the biggest problem are regulators.like i said many times before-all the rules,that come from SEC in past decade are created to favor everyone,BUT retail. they successfully achieved zero transparency levels and kiiled the golden goose of trading. hurrayy!

 

[NoDoji]

Quote from ashantt:

...but they made a bigger profit against retail investors, of $5.05 a contract.

My broker made about $5.00 a contract against me today, but I made about $70.00 a contract in exchange for those fees. Why are the HFT's not killing me?

 

[Bob111]

Quote from NoDoji:

My broker made about $5.00 a contract against me today, but I made about $70.00 a contract in exchange for those fees. Why are the HFT's not killing me?

could be a lot of reasons. size,time frame etc..

if you buying 1 contract or small amount of shares at ask and sell at bid -shouldn't be a problem.but when you trying to load\unload decent size-it is. i mean..it's been always like this,but right now-it's at the worst i've ever seen. retail is losing the money simply because by the time their order reach the exchange they usually ended up empty handed(i'm talking about my experience with stocks). forget buying at bid..there is will be always hidden or not order at 0.0000001 price better that yours and you will be last in line regardless.
you trying to hit ask-someone steps on front of you and grabs those shares. you got like 5 shares. spread is bigger,you left with partial execution and if you want to buy at current ask-you have to modify your order and pay double commission. just one example.
another is even simpler-you try to hit ask-they have enough time to see your order coming,cancel their order and move it higher.result-same as in example above. or better yet like in previous example-sell you 1 share and move ask higher. opposite when you sell. there is nothing special about "sophistication" or higher education in this game. the game is simple as a box of rocks. tools and rules are different. and that's what make the whole difference. specially in very short term trading. it's like fighting with a spear against those UAV's. you will be killed before you throw your weapon at it(and you are not going to reach the UAV anyway with that spear).

 

[gmst]

Quote from Bob111:

could be a lot of reasons. size,time frame etc..

if you buying 1 contract or small amount of shares at ask and sell at bid -shouldn't be a problem.but when you trying to load\unload decent size-it is. i mean..it's been always like this,but right now-it's at the worst i've ever seen. retail is losing the money simply because by the time their order reach the exchange they usually ended up empty handed(i'm talking about my experience with stocks). forget buying at bid..there is will be always hidden or not order at 0.0000001 price better that yours and you will be last in line regardless.
you trying to hit ask-someone steps on front of you and grabs those shares. you got like 5 shares. spread is bigger,you left with partial execution and if you want to buy at current ask-you have to modify your order and pay double commission. just one example.
another is even simpler-you try to hit ask-they have enough time to see your order coming,cancel their order and move it higher.result-same as in example above. or better yet like in previous example-sell you 1 share and move ask higher. opposite when you sell. there is nothing special about "sophistication" or higher education in this game. the game is simple as a box of rocks. tools and rules are different. and that's what make the whole difference. specially in very short term trading. it's like fighting with a spear against those UAV's. you will be killed before you throw your weapon at it(and you are not going to reach the UAV anyway with that spear).

Good informative post.

However, as far as I know - following aspect doesn't apply to futures trading.

Quote from Bob111:

another is even simpler-you try to hit ask-they have enough time to see your order coming,cancel their order and move it higher.

 

[walter4]

Quote from ashantt:


Large investors can trade thousands of contracts at once to bet on future shifts in the S.& P. 500 index. The average aggressive high-speed trader made a daily profit of $45,267..

I say tax 'em..

 

[marketsurfer]

Quote from walter4:

I say tax 'em..

I'm sorry but that's idiotic. Will only dry up the little Volume left. Are you suicidal?

 

[Bob111]

Quote from marketsurfer:

I'm sorry but that's idiotic. Will only dry up the little Volume left. Are you suicidal?

and most likely-those who doing it will be exempt.
i seriously expect it to be this exact way. don't know when,but i'm certain they are going to tax US,the retail. and this would be last and final nail to a coffin of retail trading as we know it.

if they want retail backinto stocks very simple steps are needed. steps,that require no additional funds or burden on brokers.we all know that. start with 2 orders from SEC-ban subpenny,f**k PDT rule. can be done in less than 1 minute. and we all know precisely,why SEC didn't do it. cause they are not on our side. they,like all those in DC -they are for themselves, paid,supported and lobbied by WS..they are not for you and me,the people of this country. but that's another story..

 

[denner]

Quote from Bob111:

and most likely-those who doing it will be exempt.
i seriously expect it to be this exact way. don't know when,but i'm certain they are going to tax US,the retail. and this would be last and final nail to a coffin of retail trading as we know it.

if they want retail backinto stocks very simple steps are needed. steps,that require no additional funds or burden on brokers.we all know that. start with 2 orders from SEC-ban subpenny,f**k PDT rule. can be done in less than 1 minute. and we all know precisely,why SEC didn't do it. cause they are not on our side. they,like all those in DC -they are for themselves, paid,supported and lobbied by WS..they are not for you and me,the people of this country. but that's another story..

Spot on. They will be exempt...and those who don't meet the first set of rules for exemption will lobby for amendments until every big fish who plays the HFT game has their protection racket in place.

Retail has been dying for years. The entire ride higher retail has been exiting (and they were already well out of the market when the 2007-08 debacle occurred). IMO, the flipping back and forth and front running the Fed is what they have going already...that and squeezing hedge funds that are wrong footed. Retail has been written off for awhile now.

 

[marketsurfer]

Quote from Bob111:

and most likely-those who doing it will be exempt.
i seriously expect it to be this exact way. don't know when,but i'm certain they are going to tax US,the retail. and this would be last and final nail to a coffin of retail trading as we know it.

if they want retail backinto stocks very simple steps are needed. steps,that require no additional funds or burden on brokers.we all know that. start with 2 orders from SEC-ban subpenny,f**k PDT rule. can be done in less than 1 minute. and we all know precisely,why SEC didn't do it. cause they are not on our side. they,like all those in DC -they are for themselves, paid,supported and lobbied by WS..they are not for you and me,the people of this country. but that's another story..

Makes sense. Thanks, surf