High Frequency Trading - Hype or Substance?

1235 came and went but I will not put on any longs yet-------- just very negative breadth all day. Today was also the fed meeting minutes from the Thursday several weeks ago when we actually had a sell-off day--------did not expect the notes to add any positives from the interest rate announcement day.

We may get follow through down tomorrow so I will leave my ratio at 100% to 0% until after the weekend.
 
Quote from MacroEvent:

I hit 100% to 0% shorts to longs for a period of time in the overnight for my ratio trade----------the china currency news run-up finally touched the price level for this to occur. I may hold off adding any longs until the es penetrates 1135 with the lack of clear news out of GB.
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I have one question:

Say I started at ES price 1100. Long & Short at the same time right? Then it goes up to say 1105 u Long & Short somemore along the way right? You might Long more lots than u Short since the market is rising.

But what happens to the first Short you place at 1100? Wouldn't it get stuck at -5 pts? If a mega-trend occurs and send price soaring to 1120, then it'll become -20 pts? Do your ever take a stop loss?

How do you hedge yourself? If say you have 70% Long and 30% Short when going to bed at night, then there is a major news sending the market spiking down by 20-30 pts wouldn't you stand to lose big?

Thanks for all the help so far dude!
 
When at the bottom of what I have projected of the current range for my ratio I would be 35 to 65 short to long-------- I never go below this and then I keep a stop for the long side all the time when I have 40% or more longs for news spikes. When at the lower levels of my price range when the longs are heavier, I will close everything down just before the close on Fridays at 50 to 50. Sunday night I will rebalance everything back to the proper ratio once the market reopens.

Where you start this trade from {price level} is very important and yes one side goes into the negative on the very first day if that was a heavy trend day. This trade is best started where the 50 to 50 price level is {right now I have 1160 to 1170 as the range for where my 50/50 is located}. As every little up and down movement of the es is making 1 point profits then the two sides cost basis are adjusting away from the current trading price-----------this is very powerful as the 1 point accumulations are racking up minute by minute. When you start trading for 1 point from .25 to .25, and .50 to .50, and .75 to .75, and .00 to .00 on both the short and long side at the same time the profit accumulation affect is very fast.

You can't start this trade with a small account size in the beginning-----------the minimum would be a 70,000 account and then the spread between levels traded would have to be wide in the beginning weeks of trading.
 
Quote from MacroEvent:

When at the bottom of what I have projected of the current range for my ratio I would be 35 to 65 short to long-------- I never go below this and then I keep a stop for the long side all the time when I have 40% or more longs for news spikes. When at the lower levels of my price range when the longs are heavier, I will close everything down just before the close on Fridays at 50 to 50. Sunday night I will rebalance everything back to the proper ratio once the market reopens.

Where you start this trade from {price level} is very important and yes one side goes into the negative on the very first day if that was a heavy trend day. This trade is best started where the 50 to 50 price level is {right now I have 1160 to 1170 as the range for where my 50/50 is located}. As every little up and down movement of the es is making 1 point profits then the two sides cost basis are adjusting away from the current trading price-----------this is very powerful as the 1 point accumulations are racking up minute by minute. When you start trading for 1 point from .25 to .25, and .50 to .50, and .75 to .75, and .00 to .00 on both the short and long side at the same time the profit accumulation affect is very fast.

You can't start this trade with a small account size in the beginning-----------the minimum would be a 70,000 account and then the spread between levels traded would have to be wide in the beginning weeks of trading.
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Thanks for taking the time to explain.

Electric Savant did a version of this system in this thread. Its called the "Volatility Grabber":

http://www.elitetrader.com/vb/showthread.php?s=&threadid=48230

One major issue was how to get our of those first few lots that are deep in the negative. Also, you have to maintain a negative unrealized P/L float right?

Thanks again for being so generous with your strategy.
 
Not necessarily----------If you were to start this trade and the market traded in a tight range or was choppy for several days then you would have the perfect situation. Your long and short side accounts would both be building up profits as the trading price stayed in lets say a 12 point range over these start up days. Yes at any moment there will be one side of the trade with positions in the negative, but you are hedged by the other side--------------so the rapid and repetitive profit hits are outpacing the amount of loss from the side that is "technically" negative {not a realized negative}.

To focus on the side that is negative will mask your ability to comprehend the amount of realized profits from all the 1 point accumulations. This is the aspect of ratio trading which is difficult to "see" unless you watch this realtime. I will give you a better example later----------------have to go meet friends now.
 
Quote from MacroEvent:

I will give you a better example later----------------have to go meet friends now.
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Macro,
I've been waiting for "a better example", I'd be very interested to hear it.

Thanks,
Richard
 
Quote from nitro:

I don't know if you need an institutional account or not to be able to do it, but I am able to do this at RedSky as an institution.

nitro
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Am I to understand that RedSky had you institutionalized?

(Sorry, but I can't resist a good setup.)
:D
 
Quote from Thunderdog:

Am I to understand that RedSky had you institutionalized?

(Sorry, but I can't resist a good setup.)
:D
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Well,

Technically, Yes!

nitro :D
 
Hi guys,
We are into it :).

My company developed a high-efficiency market depth processor for stock/index arbitrage. We deploy it for interlisted arbitrasge trading - by human traders and machines. Basically, it is high-frequency scalping. We developed it (as a part of our trading system) because market data providers fail to delivery necessary quality of market depth we need, especially for Island and Arca ECNs (we tried Reuters, eSignal, Realtick, etc - all they suck). Anyway, our market depth processor has latency less than 1/10 of milisecond and it runs on a cheap single-CPU PC with throughput up to 100,000 messages a second. For example, currently for all Island stocks CPU load is less than 3%. Processing includes parsing direct feed, sorting of depth (with optional aggregating) and sending it into a network for distribution. In terms of money we have traders who quite often are making 5K a day because of the superior speed of the solution. Machines are making 7-10K daily. To summarise : without high-quality data (what implies minimum latency) high-frequency trading is impossible
 
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