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BuySellSideTrader2020
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This is not correct. "High" frequency strategies can have much higher sharpe ratios than longer period strategies have. Having numerous high probability entries, as hft does, has the effect of driving volatility of returns down.
Its far more likely your back-test is not appropriately modeling fills with high enough fidelity for a strategy that trades this frequently. What happens if you take the period of time you have LIVE trading results for, and run it back through the sim? If these results don't match within reasonable margin of error... you have a sim issue.
You're correct - I addressed that in an edit. The funny thing about sharpe ratios is they can be gamed by increasing the tick frequency.
Regarding your second statement I would tend to disagree. Unless this guy is a patent genius his problem is probably simpler than fills. Market microstructure is incredibly difficult to model. I haven't done it myself (books have sufficiently dissuaded me from trying) but it seems that the signal to noise ratio is so high if you're not making markets you're not making money.
I must be misreading. Sharpe ratios are in general presented in a normalized (usually annualized) form. Tick frequency should not matter in that case, right?The funny thing about sharpe ratios is they can be gamed by increasing the tick frequency.
For starters, what is your execution model - do you take or provide liquidity? If mixed, what's the proportion? When you back-tested, what was the pnl/trade value? On your back-test, what was your fill assumption? if passive I'd use trade through, and in general it's conservative to assume taking.when I run backtests, its comes out profitable, on simulation its profitable, but on the live side its barely profitable.
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Huh, what? Sharpe ratios are in general presented in a normalized (usually annualized) form.
Sharpe Ratios can be gamed because the average profit of a trade scales with the number of trades while the volatility scales at the square root of the time. In other words by trading at a higher frequency you can increase your sharpe ratio almost indefinitely.
Oh, you are talking about in back-test? Right, as you move your trades into higher frequencies, your Sharpe increases at the cost of drastic reduction of profit/trade. In real life, if anything, you'll find that your trading costs will start increasing much faster than trading profits unless you have the right technology.Sharpe Ratios can be gamed because the average profit of a trade scales with the number of trades while the volatility scales at the square root of the time. In other words by trading at a higher frequency you can increase your sharpe ratio almost indefinitely.
Futures are usually single-listed so the broker is showing you the actual order book from the exchange. The broker is not making a market but rather passing the orders to the exchange. However, if your broker (and/or your personal technology) suck, you might be getting picked off by the faster players.Does anyone have technology that records what is shown to you by brokers accurately because currently in any bilateral agreement they are under no obligation to stick to any price their synthetic order book shows and there is no way of you showing this. My concern is very slow brokers who make money in derivatives market making whilst talking about latency. Market making on nasdaq would be very easy if you didn't have to stick to the prices you show.
Check out my experience in post#23:
https://www.elitetrader.com/et/thre...ping-0-02-and-0-03.323354/page-3#post-4698277
You can't write/test HFT strategies using non-hft platforms.
https://www.elitetrader.com/et/thre...ping-0-02-and-0-03.323354/page-3#post-4698277
You can't write/test HFT strategies using non-hft platforms.
It's pretty much a given that if you are working on anything latency sensitive, you should write your own backtesting engine. If you are assuming partially passive execution, it get's really hairy and you can't really trust the results that much.You can't write/test HFT strategies using non-hft platforms.
You have add two ticks on price movement. One tick on each side. Sims generally don’t so they aren’t realistic.Yes
You have add two ticks on price movement. One tick on each side. Sims generally don’t so they aren’t realistic.
Exactly. And if then the system is profitable in backtesting, it will be probably profitable in real trading too.
Its very similar to HFT, it will place an average of 1 trade per minute, sometimes more, sometimes less. The asset class is ES 12-18, and yes it would require low latency.
Don't trade in very small timeframes and not too frequently. Small timeframes have only small profit potential while the risk is big. Bigger timeframes have more potential and almost the same risk as in the small timeframes. So the potential for profit increases while the risk stays almost the same.
The difference between the high and the low is much bigger in 60 minute charts then in 1 minute charts.
And to make profit that's what you need: a big difference between the high and the low.
In general HFT trading in not for 20 year old boys unless your are a genius.