Is Prop Trading equities/commodities DEAD?

No one has ever seen an enviroment like this in 80 years. HFT is a natural respone to a very risky environment that has become even more risky and confusing because of government intervention into the economy and financial markets.

If you are GETCO, Tradeworxx the exchanges are allowing you free money but the amount of longerterm participants keeps shrinking which is causing the margins to erode.
 
IMO high frequency trading is more a natural response to increased electronic exchange access opportunities as well as the increased availability of capable and relatively inexpensive software platforms and toolboxes.

Every year seems unique and different than the past 80. If you recall the crash of '87, the tech bubble, 9/11, the real estate bubble; there were periods of confusion and chaos that only ebbed away through the lens of historical context. The trader who grows some stones and finds new emerging strategies and trends in the rubble and confusion makes the money.

If you are a relative value trader who measures his holding period in terms of minutes or hours and not seconds the HFTs and MMs have absolutely no bearing on your strategy. None. Regardless of your strategy you will not make it in the trading business if you choose to compete with MMs and HFTs.
 
Quote from athlonmank8:

well you must have taken a wrong turn somewhere. Also years mean nothing to me. Hours of screen time is a little different story. I've been at it since '97. In addition, Day 1 I learned about responsibility for my actions and that I'm not going to make it anywhere blaming my failures on silly stuff. You either have to get over it and find an edge or change your hobby. You've been at it for a long time. Maybe think about finding a mentor
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something is seriously wrong w/you people. my post is not about leaving the business ... it is about the manual prop trading business as a whole. i don't need to work anymore though i still enjoy it. the post is made to get feedback on the present situation. everyone seems to just have a pole up their bum, trying to make unnecessary personal points. ok, you are great, and bravo to you, we're all poud of you. it's not about me...it's about the current environment.
 
Quote from bone:

FWIW, the 'blame game' is the quickest way to get bounced in an interview. The market is what the market is. Employers/Backers absolutely hate traders who refuse to take responsibility - namely, recognizing that they didn't change their strategy approach with the market conditions. If you want to stay in this business and suceed, you are going to have to re-invent yourself along the way. The first and most important part of the process is to recognize how you bullshit yourself and sabotage your trading in the process. Nobody is holding a gun to your head and telling you to buy or sell - you will be much further along the way if you can tell yourself and a potential employer that the market changed and you didn't, instead of crying about HFT and MMs.

The fact of the matter is that an independent trader can do many things to minimize or even eliminate any advantage that MMs and HFTs may have over them - the most obvious being holding periods and timeframe sampling periods for technical studies.

Listen, this is the ultimate accountability business and nobody likes crybabies. Trading attracts alot of very intelligent people and like it or not you are going to have to compete with them. Successful traders know how to optimize their risk/reward skew by taking trades that can work properly given their own personal capitalization and execution factors.
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I think the majority of traders have adapted. I'm a hedged trader so my timeframe was beyond the standard 'day-trade' although I would like to see my daily volume increases I'm not gonna fight something that isn't there.....what I don't think you or the other critiques of this thread realize is why we're bitching; the majority of the trading that's being conducted is in a lot of cases unethical/borderline illegal. I have a tough time distinguishing between what's going on and front running, like those crooked specialists which are now in jail.
 
My best guess is the government messing around with huge deficits, asset gurantees, asset purchases has left everyone in the dark about what to expect next.

Until we get Summers, Bernanke out of there nothing will be stable.
 
Quote from SlyFlo:

something is seriously wrong w/you people. my post is not about leaving the business ... it is about the manual prop trading business as a whole. i don't need to work anymore though i still enjoy it. the post is made to get feedback on the present situation. everyone seems to just have a pole up their bum, trying to make unnecessary personal points. ok, you are great, and bravo to you, we're all poud of you. it's not about me...it's about the current environment.
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IMO, the current environment is automated trading. if you have a real strategy then it can be automated. the guys who sit, stare, and click are a joke. they are just playing slots and for some reason never research or track anything.
 
Quote from ProfLogic:

I know this question was directed at me but I would like to comment.

I traded the day of the flash crash, futures not equities but my trading partner sitting next to me does trade equities.
The flash trading, HFT's were not, in total, responsible for the overall market drop. It was a perfect storm of events that brought about this event that the HFT's were a part of, just like all of us trading that day.
Many of us trading the equity futures began shorting the afternoon before the crash and continued to add to our short positions up until 1:30 pm EST the day of the crash.
Funny there were plenty enough buyers all the way to the bottom to cover all of us shorting the market. And then plenty of sellers to cover all of us buying back on the bounce.
My trading partner got bit on a single long position simply because he was arguing with what his chart was telling him. He was telling me at 2 pm EST he should get out but being the stubborn person he is . . . he stayed in.
You are partially correct about Tradeworx, yes they stopped trading but only for 8 minutes while they could evaluate what was happening.
Funny, two weeks after the crash the markets broke through the low of the day of the crash. Why, because the markets are never wrong. Sentiment will ALWAYS create the long term oscillations that should be created. The SEC is clueless.
I've been trading futures for 15 years, I am not a HF trader and I am profitable.

"Why should anyone be allowed risk free strategies that aren't available to everyone"? Because If I spend years of my life gaining an edge over these chaotic markets I will be damned if I will be forced to share that edge with everyone.
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No this comment was not directed toward you, the risk free strategies i'm referring too doesn't apply to anyone on elitetrader. I think you're really missing the point....the crash/direction of the market was not was I was referring too, I'm talking about the abuse of the system. For people that are comparing MMs or specialists to some of the HFT firms out there really don't understand what's going on. The flash orders and subpennying that are very profitable to a select few are RISK FREE strategies and to say well the MMs had something like that, the difference being those guys actually provided a market. As crooked as specialists were they still maintained order flow, they didn't leave the floor of the NYSE when things got ugly.

If you guys think what is going on right now is comparable to anything in the past, how can you explain the trading revenues generated from some of the banks....didn't GS just have a quarter where they never had a single losing day in the history of their trading desks? 100/mil a day for how many days? I'm not exactly sure what it was, I'll have to dig around, but the fact remains this system is ridiculously lucrative and that money is coming from someone.
 
Quote from GGSAE:

No this comment was not directed toward you, the risk free strategies i'm referring too doesn't apply to anyone on elitetrader. I think you're really missing the point....the crash/direction of the market was not was I was referring too, I'm talking about the abuse of the system. For people that are comparing MMs or specialists to some of the HFT firms out there really don't understand what's going on. The flash orders and subpennying that are very profitable to a select few are RISK FREE strategies and to say well the MMs had something like that, the difference being those guys actually provided a market. As crooked as specialists were they still maintained order flow, they didn't leave the floor of the NYSE when things got ugly.

If you guys think what is going on right now is comparable to anything in the past, how can you explain the trading revenues generated from some of the banks....didn't GS just have a quarter where they never had a single losing day in the history of their trading desks? 100/mil a day for how many days? I'm not exactly sure what it was, I'll have to dig around, but the fact remains this system is ridiculously lucrative and that money is coming from someone.
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Thanks for clarifying the position.
 
Actually, I can explain the trading profits, and if you can't, you really aren't qualified to even hold an intelligent discussion on the inner workings of an investment bank because you have no clue how a trading desk operates.

You do realize that the VAST majority of their trading revenue comes from their fixed income desks, right? You do realize that a huge portion of the corporate market, both above and below investment grade was trading at distressed levels at the start of the year. And I'm sure you realize that when trading debt at distressed levels the bid-ask spread widens to compensate for the added risk. And based on that knowledge, I'm sure you're also aware that when you can buy at the bid and sell at the ask, and the spread between the two is measured in multiple points, the result is lots and lots of profits at basically zero risk unless inventory is involved. And when you combine the above with a market that is rallying beyond belief (to levels not seen since before the credit crisis) along with a new issue calendar that has done a moonshot compared to the year previous, you have the recipe for an absolutely perfect trading environment where anyone not making money should be fired on the spot.



Quote from GGSAE:

If you guys think what is going on right now is comparable to anything in the past, how can you explain the trading revenues generated from some of the banks....didn't GS just have a quarter where they never had a single losing day in the history of their trading desks? 100/mil a day for how many days? I'm not exactly sure what it was, I'll have to dig around, but the fact remains this system is ridiculously lucrative and that money is coming from someone.
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Quote from TraderZero:

Actually, I can explain the trading profits, and if you can't, you really aren't qualified to even hold an intelligent discussion on the inner workings of an investment bank because you have no clue how a trading desk operates.

You do realize that the VAST majority of their trading revenue comes from their fixed income desks, right? You do realize that a huge portion of the corporate market, both above and below investment grade was trading at distressed levels at the start of the year. And I'm sure you realize that when trading debt at distressed levels the bid-ask spread widens to compensate for the added risk. And based on that knowledge, I'm sure you're also aware that when you can buy at the bid and sell at the ask, and the spread between the two is measured in multiple points, the result is lots and lots of profits at basically zero risk unless inventory is involved. And when you combine the above with a market that is rallying beyond belief (to levels not seen since before the credit crisis) along with a new issue calendar that has done a moonshot compared to the year previous, you have the recipe for an absolutely perfect trading environment where anyone not making money should be fired on the spot.
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Best post on this thread. You know I read through some of the posts on ET from time to time and it seems that 99% of the people on here don't even realize a fixed income market exists. The fixed income market dwarfs equities by mutiplies of 10. I would venture a guess that less then 5% of GS revenues come from the equity universe.

In fact the equity divisions of most investment banks are the lowest paid people and usually considered bottom fry. The real money is in fixed income for those banks both in high grade and low grade debt. My guess is the only reason any bank even bothers with an equity desk is to caputure order flow info that can probably benefit some other division of the bank.
 
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