How are you traders competing with (and beating) the algos, HFTs, etc.?

[Slartibartfast]

There seem to be a lot of successful traders on here (and undoubtedly many unsuccessful ones). So, I'm just curious on how you guys think it is that you make money at it.

Take computer trading. Make a few assumptions:

1. Computers can execute trades much faster than humans; and

2. Programmers are just a smart as non-programming traders, and can program algorithms that catch and trade patters much faster than human traders.

3. There are plenty of these programmers (and programs) out there.

If all those assumptions are correct, how could human, non-automated trading really ever compete? Won't any recognizable pattern or statistic be picked up by the algorithms right away and they will get to the trade first, sucking any potential value away?

You might say, "yea, but we traders KNOW that their algorithms do this, and we react to this, and this is the pattern we trade on." But in short order it seems the algorithms would pick up on THAT as well, and get in first.

Just curious for yalls thoughts. Thanks!

You have hundreds of posts and you still just don't understand or know a darned thing.

Stop wasting people time. You will never be a trader man. Seriously, have you even tried to sim trade?

Just effing do it , you will understand more and stop being a eternal why boy.

I mean seriously, how many lame often crawly posts and now this? You need to start to get your hands dirty.

 

[lawrence-lugar]

There seem to be a lot of successful traders on here

You might say, "yea

Just curious

Algos and HFT's are merely just scalping for literal crumbs. . ,

You won't and can't be affected by it if you're a macro trader realizing and timing and trading the major scoop move(s) of the day.
Leverage or options doing this, and you can be in a happy place if you have the necessary mindset and skill and wisdom to approach it.
2018 ET.

Saltynuts, you've been asking alot of questions for some time. -- Just trade and make a killing, or fail and leave/be quiet.

 

[JackRab]

Just don't pay attention to them... if you're doing your own thing... why worry about algo's? They are usually in-n-out very quickly anyway, so what's the point? You're not really competing with them either... depending on what and how you trade. If you're mainly scalping ticks... then it's a worry, otherwise... meh...

 

[Xela]

1. Computers can execute trades much faster than humans

True, but not relevant to humans who are trading in ways whose success doesn't depend much on execution-speed.

2. Programmers are just a smart as non-programming traders

Maybe true, but not relevant: they're doing something different.

3. There are plenty of these programmers (and programs) out there.

True, but not relevant.

If all those assumptions are correct, how could human, non-automated trading really ever compete?

It doesn't matter: you don't have to choose to compete with algorithms to be a successful trader.

Won't any recognizable pattern or statistic be picked up by the algorithms right away and they will get to the trade first, sucking any potential value away?

Apparently not. Not "any". Only "some" - otherwise there wouldn't be any successful human, non-algorithmic traders, would there? Since there clearly are, however, why have you decided that the questions you're asking above are relevant to you? Why not just develop a trading skill-set that doesn't depend on "competing with algorithms"?

 

[nickynoes]

Why would any successful trader see the need or even want to “compete” with such participants. It doesn’t matter, keep your head down and focus on what works for you.

Also, you really need to start putting your ideas into actions to get some results you can work with. The more you keep this up the more confused you will get. Trading is easy, you can only make it harder on yourself.

 

[Scataphagos]

With... conviction?

Only wannabees trade direction. Edumucated mofo's know real money is in spreads.

Disagree.

I've traded a long time and have never traded spreads nor do I have an interest in doing so. (Don't like options, either... too much hassle for too little money on too many positions for a retail screen jockey like me.)

I once had a PM conversation with an ET old timer who runs a significant operation in options. My comment was that "options are nickel and dime money". He responded with "well, if making $100-$300 per play is nickel and dime, I'll take it". And that's true.... if you can make LOTS of small money plays with a high percentage of wins, you can be successful. There is more than one way to skin the market's cat.

However... if one can learn and has discipline, trading "direction" is likely more profitable* than any other. (It has always been my view.... that to make any "real" money, one has to make a large, unhedged directional bet and be correct.)

*Every year we learn about some hedge fund guy who "killed it"....made a big play on something.... sub-prime RE, shorting loans, CDS, distressed sovereign bonds, loaded up in energy sector or commodities... something. He didn't make the big gains by working a "spread". Only pitty, however, such big winners are as much a record of good fortune rather than supeprior brains and market acumen. The hero this year is often the goat of next. That's not a comment on the successful trader**... it's just the nature of the markets. Which is why.... whatever potential "big possible win play" one one makes, must always be protected with stops.

** One of the "Paulsens"... John, if I recall.... the one who make $Billions shorting sub-prime RE loans in ~2008-ish.... story on him recently was that he'd lost 70% of his AUM through client redemptions in 2017. That wasn't because he was "still killing it".

 

[Xela]

I've traded a long time and have never traded spreads nor do I have an interest in doing so. (Don't like options, either... too much hassle for too little money on too many positions for a retail screen jockey like me.)

If one can learn and has discipline, trading "direction" is likely more profitable.

I've traded only a fraction as long as you, but I agree unreservedly with the above (and always have).

 

[Scataphagos]

I've traded only a fraction as long as you, but I agree unreservedly with the above (and always have).

Only a "fraction" of trading time, yet you get it so well.

 

[Error Correction Funder]

UHFTs are service providers. They provide liquidity across very small time spaces.

The main benefit of faster and faster short term traders is narrower spreads. An unseen benefit for LFTs is reduced volatility.

When I traded illiquid options, I could always be assured that the algos would hit my order somewhere between the NBBO and that I would even get a rebate for my trouble. In other words, the good exchanges paid me to trade since I was technically providing liquidity instead of taking.

Now, with liquid options, the spreads are minimal, relatively speaking, and when they aren't at minimum tick, my order still sometimes is liquidity providing so long as the market didn't move into me before my order reached an exchange.

All of the foolish rules coming out trying to force spreads wider or slow trading only serve to introduce cost back into the system.

 

[Spooz Top 2]

Disagree.

I've traded a long time and have never traded spreads nor do I have an interest in doing so. (Don't like options, either... too much hassle for too little money on too many positions for a retail screen jockey like me.)

I once had a PM conversation with an ET old timer who runs a significant operation in options. My comment was that "options are nickel and dime money". He responded with "well, if making $100-$300 per play is nickel and dime, I'll take it". And that's true.... if you can make LOTS of small money plays with a high percentage of wins, you can be successful. There is more than one way to skin the market's cat.

However... if one can learn and has discipline, trading "direction" is likely more profitable* than any other. (It has always been my view.... that to make any "real" money, one has to make a large, unhedged directional bet and be correct.)

*Every year we learn about some hedge fund guy who "killed it"....made a big play on something.... sub-prime RE, shorting loans, CDS, distressed sovereign bonds, loaded up in energy sector or commodities... something. He didn't make the big gains by working a "spread". Only pitty, however, such big winners are as much a record of good fortune rather than supeprior brains and market acumen. The hero this year is often the goat of next. That's not a comment on the successful trader**... it's just the nature of the markets. Which is why.... whatever potential "big possible win play" one one makes, must always be protected with stops.

** One of the "Paulsens"... John, if I recall.... the one who make $Billions shorting sub-prime RE loans in ~2008-ish.... story on him recently was that he'd lost 70% of his AUM through client redemptions in 2017. That wasn't because he was "still killing it".

Hey Scat ... disregard this disgruntled clown as he is a dually desperately seeking confrontation & attention. I know exactly who he is/was.