Not sure if I'm agreeing or disagreeing with Random.Capital in making this comment, but it is certainly true that the withdrawal of the retail investor from traditional stock investing has had a huge negative impact on the ability for traders like most elitetraders to make money - not primarily because of any decrease in traded volumes, but rather because of the rise of the ETF and the related rise in correlations and ETF arbitrage trading. It appears from DeeDeeTwo's posts that he/she would have a lot of interesting things to say on this topic.
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HFT robots seeing orders before the exchange ?
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Quote from DeeDeeTwo:
Saying that you have trouble with "HFT robots"...
Is like saying spam prevents you from sending email.
Yes, cleverly phrased ... a good sound bite for an HFT apologist. Too bad it's neither true nor applicable for any trader or investor who uses non-marketable limit orders to invest in or trade low-liquidity stocks.
Indeed ... it speaks of the soon-to-come day when every poor schmuck who wants to invest in a few hundred lousy shares of some low-liquidity stock will, if he wants to get filled in his lifetime, have no option except to hit/lift and pay the toll set by the few market makers still viable after the dust settles ... don't know whether to laugh or cry.
Ok I admit it, after I'm through shedding tears for my own dead trading program I will laugh.
Ok I admit it, after I'm through shedding tears for my own dead trading program I will laugh.
Remember, an IB smart limit order will interact with their US stock dark pool, so, to some extent, from the dark passive side, you too can facilitate the matching of retail orders willing to pay for immediacy.
If you can't beat them, join them.
If you can't beat them, join them.
Threads like this are all over ET, basically people are polarized to either side of the issue. Which makes me think that the truth is probably somewhere in the middle, whatever that is...As far as liquidity provision taking a dump since 2006, isn't that also tied in with the decrease in volatility?
quote from Rationalize:
Remember, an IB smart limit order will interact with their US stock dark pool, so, to some extent, from the dark passive side, you too can facilitate the matching of retail orders willing to pay for immediacy.
True, I get a significant "smattering" (maybe 0.5% - 1.0% of all executions) of dark pool executions from my SMART limit orders, many of which are among the best executions of the day ... but these are the exceptions that prove the rule: these days, threads like this one tend to settle on the term "HFT" as shorthand to cover all the predatory trading that has consumed the equity markets especially for illiquids, but in my experience the number one destroyer of profitability for liquidity-provision-for-illiquids strategies has been the huge shift of volumes to dark pools coupled with the huge increase in aggressiveness of the dark pool sub-penniers. Payment for order flow, dark pools and sub-pennying by order internalizers has been going on since before I began trading equities full-time, but until 2007 it was just an annoyance, with only a few good trades stolen per day ... now the order internalizers are almost 100% efficient at grabbing all the low-risk, high-profit "uninformed order flow" that they theoretically can.
quote from Craig66:
Threads like this are all over ET, basically people are polarized to either side of the issue. Which makes me think that the truth is probably somewhere in the middle, whatever that is
I am biased so stop reading if that causes you to discount my thoughts to $0 ...
First, you have to put a filter on every poster for any black-or-white statements ... everything on this topic is a matter of degree one way or the other, and there are many valuable comments that should not be ignored, just filtered to account for the fact that even the poster would probably agree that the 100% black-or-white interpretation is too extreme.
Given this, my strong impression is that the polarization occurs primarily on the dividing line of whether the poster is basically a taker of liquidity or basically a provider of liquidity. To the extent that is true, it would be incorrect to "take the average" and just assume that the "truth is probably somewhere in the middle" ... far better to accept that the polarization is real and needs to be accounted for to get as close as possible to the true facts.
quote from Craig66:
...As far as liquidity provision taking a dump since 2006, isn't that also tied in with the decrease in volatility?
My two cents: Just as night follows day, the profitability of market making goes up and down with market volatility, so this is always an important consideration ... but for any posters who are not morons you can safely assume that this ineluctable factor has been filtered out before arriving at further conclusions. I will give one example: 2007 was the least volatile year for my trading strategy up until perhaps 2012, but I still had a 50% ROC for 2007. On the other hand, 2011 was pretty volatile especially the August - October period, but my ROC for 2011 was only about 20%, and more tellingly was less than 20% (annualized) during the August - October period.
Quote from trader422:
True, I get a significant "smattering" (maybe 0.5% - 1.0% of all executions) of dark pool executions from my SMART limit orders, many of which are among the best executions of the day ... but these are the exceptions that prove the rule: these days, threads like this one tend to settle on the term "HFT" as shorthand to cover all the predatory trading that has consumed the equity markets especially for illiquids, but in my experience the number one destroyer of profitability for liquidity-provision-for-illiquids strategies has been the huge shift of volumes to dark pools coupled with the huge increase in aggressiveness of the dark pool sub-penniers. Payment for order flow, dark pools and sub-pennying by order internalizers has been going on since before I began trading equities full-time, but until 2007 it was just an annoyance, with only a few good trades stolen per day ... now the order internalizers are almost 100% efficient at grabbing all the low-risk, high-profit "uninformed order flow" that they theoretically can.
If you can't make money off 100s of stocks with $0.03 to $0.04 spreads...
And then blame it on "predators"...
Why should anyone listen to you?