HFT vs Discretionary Trading

[Fundlord]

Some guy who heard about my vast profits trading said it was all gambling because "HFT and algorithms make all the money"

Does anyone agree with that HFT has an edge over us discretionary traders ?

Apart from speed and getting in at a slightly favourable price. Do they really have a real advantage ?

I know places like virtu financial never lose but he's convinced he can just go out and program an algorithm on his 200$ laptop and make millions.

I have heard tons of stories about parlaying small grubstakes into 7,8,9 figure fortunes by discretionary trading but never of some guy with an algo, eventually market conditions change and they stop working.

 

[galvinlee888]

I have heard tons of stories about parlaying small grubstakes into 7,8,9 figure fortunes by discretionary trading but never of some guy with an algo, eventually market conditions change and they stop working.

You "heard" stories - Do you see the real proof (verified statement) or just stories?

I don't think anyone in ET has the hardware system and programming capability that can perform the HFT type algo, most only doing some simple program (MT4 BS and etc) which will loss eventually when market conditions change.

 

[qxr1011]

Some guy who heard about my vast profits trading said it was all gambling because "HFT and algorithms make all the money"

Does anyone agree with that HFT has an edge over us discretionary traders ?

all life is gambling

HFT has its edge... is this edge really over or under the discretionary trader depends on the ability of the discretionary traders...

 

[Javier]

Men flash crash was with algo wining 68 mill $, jpmorgans algos didn loose one day last year, when you want enter, they are selling to you..( algo hft OP)

 

[Fundlord]

Men flash crash was with algo wining 68 mill $, jpmorgans algos didn loose one day last year, when you want enter, they are selling to you..( algo hft OP)

I understand that, but this guy is deluded into thinking you can do HFT on an acer laptop. I would think that you would need supercomputers and a bunch of other sophisticated things average traders do not understand.

 

[galvinlee888]

I understand that, but this guy is deluded into thinking you can do HFT on an acer laptop. I would think that you would need supercomputers and a bunch of other sophisticated things average traders do not understand.

I don't think the average trader can afford to have those supercomputers, they can't even afford to buy an apartment with a mile from the exchange

 

[Javier]

I understand that, but this guy is deluded into thinking you can do HFT on an acer laptop. I would think that you would need supercomputers and a bunch of other sophisticated things average traders do not understand.

You can develop algos but no hft, for that you need collocation (stay near the exchange). With an acer i bossted it long ago (15 years) sniffing for a week. After that i catched MAC and decrypted neighboughts wifi password.after that acer died. R.I.P

 

[Occam]

I understand that, but this guy is deluded into thinking you can do HFT on an acer laptop. I would think that you would need supercomputers and a bunch of other sophisticated things average traders do not understand.

Single-threaded performance is relatively fixed, regardless of budget -- the fastest general, single-threaded performance can be had in $400 gaming chips (overclocked, of course). The top "supercomputers" today consist of networks of 000's of standard CPUs (sometimes with GPUs, which are even cheaper & simpler on a per-unit basis); such "supercomputers" may be useful to you, or not, depending on how easy it is to parallelize your algorithms, which may be nontrivial.

Also, the "cloud" services on offer today, if they suit your computational needs, may be a lot cheaper than buying your own hardware.

For HFT, the real hardware bottleneck/cost seems to be in colocation, data fees, and connectivity (including some very expensive connections between NY and Chicago, for those who compete in that space). The data/colocation/connectivity fees get ridiculous very quickly -- just take a look at the SEC filings of some of the HFT's that have gone public, or the pricing sheets from the exchanges.

 

[Baron]

The key point to understand is that an HFT system is able to capitalize on split-second opportunities that you as a human being simply cannot. So the real edge an HFT has is in the micro-second analysis and execution capability.

But, is that an edge OVER a competing discretionary trader in the market? Technically yes, because the HFT is doing something a discretionary trader can't even do. But to imply that an HFT is taking money out of the pockets of discretionary short term traders and therefore "making all the money" is misleading and untruthful in my opinion.

It would be like saying a day trader is taking money out of the pockets of long term investors, but we know that's not really the case. If anything, the day trader just provides liquidity for the long term investor whenever that investor chooses to buy or sell. In other words, just because you trade in and out of AAPL 10 times a day doesn't really impact my ability to get out of my 5,000 share long term position that I've been holding for 4 years whenever I choose to do so. You have an edge over me in the sense that you can take advantage of short term price fluctuations but your activity isn't really affecting me because it's taking place in a completely different time frame.

 

[i960]

I'd wager to say that if they made selling order flow illegal and that brokers could not use internal order flow for monetary gain then we'd see an impact in HFT edge.

Next step: cancellation charging or limiting.