How much does a HFT trader typically make?
- Thread starter turkeyneck
- Start date
Not all of them - you can buy a NYSE MM firm (with guys on the floor) for <$5M. The only people more hooked up than those guys is Congress.
That said - ULLDMA guys allow the LMM/DMM business to take on less risk and the way things are today with such thin margins, much of the LMM/DMM business would go out of business (or not be profitable) if all the ULLDMA guys just went away.
Everything has complex relationships and charging for cancels, while it may sound good (even I get frustrated and say stuff like "I hope they start charging for cancels") but the reality is that would force many of the NYSE LMM/DMM's to raise capital requirements which would make it a break-even or losing business.
Thanks for the tips Mark, appreciated.
I whole-heartedly agree with you second tip - it will definitely help me lower my losses from a non-performing strategy over the next 20-40 years (till the time I keep trading)
About your first tip, I see what you are saying, yes its a fine line between robustness and profit maximization. Thanks for that.
I SHOULD ALSO SAY ABOUT TIP 1.) that your chosen setting should also have a good steady sloping equity curve. the look of the equity curve is very important. if you have a downward hook right at the the end of the optimization discard that results.
in the old days we wanted a system to return 1.25 profit factor, 60% winning trades, a min trade profit/loss of 250., and longest period to new equity highs 90 days, this was our criteria for the ned davis technaylzer program that we run. many of the models i published were discovered on that platform. and even today we are still working off of discoveries made off that platform.
mark
Mark, Thank you for your time to throw more light on your point 1. In my strategy development, I look at 4 things that outweigh other aspects: PF, Win %, DD frequency and severity, and the looks of equity curve. I typically don't measure the time required for a new equity peak, since I am not bothered about either being emotionally in a DD for a protracted period, nor do I have to report my performance to anxious investors.
I go for typically PF>1.8, % win 35-45%, and very tightly controlled DDs. Tightly controlled DD allows me to lever up the system significantly more. Low win rate however means that I have sequence of 6-10 losses in a go fairly often. Finally I have discovered something with PF 1.3, and win % around 62%, which will greatly aid my trading by making it more consistent, so that I have higher number of profitable months in a year.
So I wrote above about the metrics I am looking at. If you have any critique of them, I am all ears!!! Thanks.
peter aan comes to my mind he trades this way and has been very successful for a very long time. it works you have to have a certain emotional ability and i admire that trait. if you can do this then you probably will never have a problem implementing new and different ideas with that discipline ability. i do think that % is the least important item mentioned above. explain latter at end.
these stats are dead on maybe even too good for the definition of a trending type method. this is the most of what you would expect from that approach. in fact as you approach 45-55% your in swing system territory.
i hear you on the above 62% but consider:
1.) there is a concrete action/reaction tying percent winners to two methods of trading, trending and counter trending.
2.) the extreme on both ends is very good but as they cross in the middle it gets very profitable impossible.
3.) counter-trending at one end you have 80% winners at $100 each with the occasional string of losers that average $2000 each.
4.) trend-following at the other end you have 20% winners making $2000 each and the average string of losses of $100 each.
{these numbers for profit and loss above are pulled out of the air but the 20-80% are pretty solid as a base.
5.) for a trader doing 35-55% transitioning to 60+% you will be faced with more winners at less profit and less losers larger in size.
6.) for the upside you have the emotional skills of a lion laying in tall grass, waiting for the big kill of the water buffalo.
7.) to gain the gift of flight you will travel light, have little down time to rest because you have to feed often in smaller quantities.
8.) so the percentage of profit is nothing more than a concrete indicator of the method that you trade, nothing more.
it (percentage of profit) serves absolutely no other purpose it's like a stop light indicator. 20% (green = trending), 50% (yellow = swing), 80% (red = counter trend). typically this covers the bulk of system trading types. there are other methods i have left out i know numerous methods. but generally speaking this is what you have.
mark
ps my advice would be to refine what you have and not jump to a new horse, until your so good you don't have to jump to a new horse. that's the time to experiment is after the very successful application and perfection of the existing method. otherwise you will regret getting distracted.