How exactly do "high frequency" strategies work?

E

ezbentley

I am just very curious on the nature of these mysterious high frequency strategies. What kind of strategy would make tens of trades "per second?" It's hard for me to image any meaningful price move on the order of milli-seconds. Can the experts here enlighten me on the general concepts of such strategies?
 
it's not tens of trades per second and you don't really expect anyone to give away here that kind of strategy do you ? ? ?
 
Watch the level II you can see them operate... some, by my estimation, get filled way under one out of every 1000 order posted - perhaps more like one out of every 10,000 orders posted gets filled.
 
true high freq is normally arb or stat-arb related. look for pricing discrepancies across trading venues. the guys who spot them fastest and have the fastest execution win the prize.
 
Quote from ezbentley:

I am just very curious on the nature of these mysterious high frequency strategies. What kind of strategy would make tens of trades "per second?" It's hard for me to image any meaningful price move on the order of milli-seconds. Can the experts here enlighten me on the general concepts of such strategies?
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high frequency = low wavelength
 
In addition to stat arb, instead of posting an order for 10000 shares, its better to post 100 orders of 100 shares around a given price. By using hi-frequency trading, one could disguise that order over a few seconds. No need to use VWAP.
 
Of course I don't expect anyone to give away the strategies. I was looking for more general ideas and the concepts behind them, like stat-arb.
 
Find an instrument that tracks a basket of stocks, like the S&P index. Use your computer program with a direct link to the exchanges to observe when the value of the underlying stocks moves without a corresponding movement in the derivative. Arbitrage it away.

I think the big-budget pros effectively have a monopoly on this sort of thing...
 
Quote from ezbentley:

Of course I don't expect anyone to give away the strategies. I was looking for more general ideas and the concepts behind them, like stat-arb.
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a couple of people who were in my thread on stats ended up using measured movement tick data and made autotrading programs that trade once per hour for about 7 trades a day and someone i think even did it on the 30Min bar.... if consistent return low DD% steady increase growth in equity across Large number of trades is waht you mean
 
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