High Frequency Trading - Hype or Substance?

Quote from ssternlight:

lol...what's the matter you didn't like the academic papers stashed there? :)

EricP has been doing this stuff for years. Maybe he will stop by and offer a thought or two...
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merely illustrated hype.
like only things that help me make money.
run of the mill 'academic' stuff doesn't.
 
Quote from ssternlight:

There is some stuff -- including a few interesting articles -- stashed here .

The recent competition and the winning buying the book strategy was interesting...
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I learned alot from those papers. Thanks for the post.

nitro
 
LoosenUp-------- I trade this way for the ability to be neutral day after day and not having a "need" for the market to go one way or the other to be profitable. You do need multiple accounts that are cross-margined and starting this type of system is the crucial part. If you start this system correctly you will have your cost basis of the longs and shorts spreading farther and farther apart, to a point where the two sides cost basis are outside of the boundaries of the daily trading range. This creates the perfect situation as big trend days or multiple trend days do not hurt you in any way.

The repetitive and continuous 1 point profits on both the long and short side all through out the day are the profit accumulation strength of this way of trading. Yes range or choppy days are really good for this as both sides of the trade end the day with nice gains and a further spread of the sides cost basis.

I will try to take advantage of extreme moves like Thursday to let the shorts run a bit as they did below the 1180 level and my longs only had accumulation orders down to 1190. When price was moving back up after the 1170 lows, I put the needed longs that did not get added in at 1176 to 1180. 1171 to 1189 was missed for the longs since I did not have standing orders to accumulate below 1190. I never have standing long orders on for more then about 8 to 10 points below the current price levels incase some news event hits. Thursday I had to add 19 price levels of long orders and this did not happen until the 1176 to 1180 levels as I wanted to know what exactly had caused the big sell off. The short side was covered for the ones that did not have standing buy-to-cover orders between 1172 and 1175, so that came out about the same as if I had just had standing buy orders all the way from 1179 down to 1171.

There was a few good whipsaws in there during the sell off and recovery that had some good profit hits so Thursday turned out very profitable. I think I wore my mouse out that day with all the frantic order clicking.

If price levels are trading down at the lows of my plotted fib levels, like around 1130 then I would be at 35% to 65% shorts to longs. In this case I would have stops in place for my long positions at all time for any news related events. The short side in this case would have buy back orders down to the long stop level and then the rest would be able to free fall if the news was very bad. I also do not leave all these longs on for the overnight session when at the lower fib levels {I go to 40/60 or better at the end of every day session}. I want to be properly hedged day after day so these type of rules must be followed to protect all of the accounts capital.

I do have one other system that I trade during the day which is much easier to trade then my ratio trading and this system can run with the intra-day trends. This is a linear regression line based system that also trades in both directions at times until strong trends are established. If we have big trend days like Thursday and Friday up moves then I can take advantage of this in a separate system.
 
Quote from MacroEvent:

That was suppose to be 72%/28% shorts to longs prior to the Thursday news selloff-----then at the end of Thursday I was at 81%/19% shorts to longs. At the lows of Thursday I was at one point sitting around 58%/42% shorts to longs with the big spike down. How this all played out Thursday would take a long time to explain as I had short side position buy-to-covers down every point to 1180 and new long buy orders down to 1190 sitting for the overnight session. Once the price started tearing down I was clicking off orders like a madman-----fortunately I use xtrader which was rock solid all through the price movement.
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Interesting,

Do you use separate accounts for each side or does your broker allow you to hold long and short positions in the same account -- if so who do you use?
 
Quote from CPTrader:

Take today for instance.. you buy the ESU5 at 1195 looking for a quick 30 minute 2 - point trade, and then the terrorists strike, ESU5 collapses 20 points in minutes, liquidity vanishes and you exit at or near the lows - you lose 20 points while looking for a 2 point profit. You don't call that risky or am I being overly simplistic and naiive?
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yes very. You also are stating that you do not know the frequency of "high frequency"
 
Quote from MacroEvent:

LoosenUp-------- I trade this way for the ability to be neutral day after day and not having a "need" for the market to go one way or the other to be profitable. You do need multiple accounts that are cross-margined and starting this type of system is the crucial part. If you start this system correctly you will have your cost basis of the longs and shorts spreading farther and farther apart, to a point where the two sides cost basis are outside of the boundaries of the daily trading range. This creates the perfect situation as big trend days or multiple trend days do not hurt you in any way.

The repetitive and continuous 1 point profits on both the long and short side all through out the day are the profit accumulation strength of this way of trading. Yes range or choppy days are really good for this as both sides of the trade end the day with nice gains and a further spread of the sides cost basis.

I will try to take advantage of extreme moves like Thursday to let the shorts run a bit as they did below the 1180 level and my longs only had accumulation orders down to 1190. When price was moving back up after the 1170 lows, I put the needed longs that did not get added in at 1176 to 1180. 1171 to 1189 was missed for the longs since I did not have standing orders to accumulate below 1190. I never have standing long orders on for more then about 8 to 10 points below the current price levels incase some news event hits. Thursday I had to add 19 price levels of long orders and this did not happen until the 1176 to 1180 levels as I wanted to know what exactly had caused the big sell off. The short side was covered for the ones that did not have standing buy-to-cover orders between 1172 and 1175, so that came out about the same as if I had just had standing buy orders all the way from 1179 down to 1171.

There was a few good whipsaws in there during the sell off and recovery that had some good profit hits so Thursday turned out very profitable. I think I wore my mouse out that day with all the frantic order clicking.

If price levels are trading down at the lows of my plotted fib levels, like around 1130 then I would be at 35% to 65% shorts to longs. In this case I would have stops in place for my long positions at all time for any news related events. The short side in this case would have buy back orders down to the long stop level and then the rest would be able to free fall if the news was very bad. I also do not leave all these longs on for the overnight session when at the lower fib levels {I go to 40/60 or better at the end of every day session}. I want to be properly hedged day after day so these type of rules must be followed to protect all of the accounts capital.

I do have one other system that I trade during the day which is much easier to trade then my ratio trading and this system can run with the intra-day trends. This is a linear regression line based system that also trades in both directions at times until strong trends are established. If we have big trend days like Thursday and Friday up moves then I can take advantage of this in a separate system.
More...

Thanks for adding the multiple accounts comment..it helps clarify that you (or any person ) needs mulitple accounts or this stuff. another enhancement can occur when a hold aspect is dominating rather than the "postage stamp" aspect of the strategy. It goes to multiple fractals being enabled.
 
ssternlight--------- I have separate short and long accounts for my ratio trading that are cross-margined and separate short and long accounts for my linear regression line intraday trading that are cross-margined. At times I may move funds between the ratio trading accounts at the end of a week to keep the account balances in line with a formula I use depending on what the current ratio is on that day. This is almost like having two commingled hyperactive swing trades on in both directions at the same time----------- just their position size adjusts over time in relation to the markets price movement. Swing trades have fairly static cost basis though and my system has a very active movement of each sides cost basis as each week goes by.

How many systems can have a 100% profit rate per trade, week after week for all closed out positions? This is the only way I have concluded to get an end of year profit factor or per trade rate that is very very high.
 
Quote from MacroEvent:

ssternlight--------- I have separate short and long accounts for my ratio trading that are cross-margined and separate short and long accounts for my linear regression line intraday trading that are cross-margined. At times I may move funds between the ratio trading accounts at the end of a week to keep the account balances in line with a formula I use depending on what the current ratio is on that day. This is almost like having two commingled hyperactive swing trades on in both directions at the same time----------- just their position size adjusts over time in relation to the markets price movement. Swing trades have fairly static cost basis though and my system has a very active movement of each sides cost basis as each week goes by.

How many systems can have a 100% profit rate per trade, week after week for all closed out positions? This is the only way I have concluded to get an end of year profit factor or per trade rate that is very very high.
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Re last paragraph. Try to give consideration to using the way you determine to change the cost basis over time as a strategy that could be applied to modifying orders for the purpose of reversing holds on non closed out positions. Say for example you decide to close out; then you could in the appropriate account "affect" a reversal instead of a "close out". I feel that this is, in effect, a way to keep your stratey decision making the same and at the same time continue to be in the market instead of sideling that capital until you later rotate it back nto the balancing process that you do. It is the difference between considering profits per trade and profits per available capital.

You do not fix things that are not busted. Terrific. There is still the aditional element of sidelined capital that you have.

I really recognize how you do keep a lot of capital working and chunck off steady profits as the directional nature permits. I do see you feeding that "taken profit" and subsequently reapplying it. My suggestion is to do a "pseudo reversal" across accounts and utilize the exit decision as a more powerfully leveraged decision (twice the financial power).
 
HFT to me is a proof of someones inability to trade the market efficiently.
The best trades you can do is to buy in the bottom and to sell in the top.
But as this seems to be quit difficult, traders start to trade in shorter timeframes. Shorter timeframes are better predictable than longer timeframes, because the difficulty of predicting the direction grows exponentially with the length of time.
This means that traders who can make a 20% return by trading 10 times a year are far better traders than daytraders who get the same return by trading every day; and daytraders are far better traders than scalpers who make 20% a year.

If we take last friday on the ES as an example:

What you should have done is go long 3 minutes after the opening and close your trade just before the closing. This would have given the lowest risk and the highest return. So why do scalpers scalp these moves? Because they have no idea at all what the market will do, so they take little pieces of the move and get out each time because they are afraid to lose their profit. A second possibility is that they don’t like to make big profits in 1 trade and prefer to make dozens of small trades with less profit in total and 20 times more commissions paid to their broker.

My conclusion is what I said on the first line: HFT to me is a proof of someones inability to trade the market efficiently. He has to adapt his trading style to what he is able to manage. So HFT is no hype, it is a necessity for a large group of traders. This doesn't mean that I see scalpers as a minor kind of traders, every person has limited capabilities in some areas. I’m lucky that I have a little bit knowledge about trading, but in many other areas I’m lousy.
 
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