Manual tape reading & DOM in an algo age

mbondy said:
I could literally answer this question with a one page response but I will keep it short.

99% of the time I'm adding liquidity. Keep in mind I trade stocks, not futures, and with the rebate passthroughs on various ecn's using various routing strategies, most of my trades are either negative commission or close to (meaning I get paid a small fee to trade). I prefer to get paid to trade rather than the other way around.

Second, my entries are generally not at the nbbo. Typically, I'm entering in an area either above or below the current best bid/offer somewhere based upon my expectations at the time and therefore, I'm not fighting for a spot in line at the nbbo when price gets to my entry. There are other ways to jump the queue but I won't get into that. When I exit, I offer out. Occasionally I will hit out but even then I can use a take/make exchange to reduce my fees.

My understanding of adverse selection is from the specialist days when they were obligated to make markets with players they KNEW were better informed than they were. I am neither making markets nor looking to capture the spread. Sure hft can game my orders but my agenda is very different than what they're doing.
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In the old NYSE prices-set-in-fractions days:

Resting orders outside the bid and offer where great!

The reason resting NYSE orders were great for savvy traders was that if the specialist jumped over your order to fill a big order, he had to improve your fill price to the price he gave on the next print. (Example: Stock price is 100 and your buy order was 99 and 7/8. If the next print was 99 and 3/4 you got that print and recieved a bonus 1/8)


Entire strategies were built around Fishing Orders that were canceled and resent a little farther away if the stock price drifted too close to the order because the trader was looking for the specialist to trade through him and improve his fill price.
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Thanks for your great reply!
 
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traider said:
For me adverse selection works like this

for simplicity, take a stock with ticksize 1.

Without any bias, go long and short randomly, allocate 50% to long and 50% to short.
When you actually get filled, because of subpennying and other shitty tricks that guarantee you are the last man in the queue, you always have to exit at a loss of 1 tick or more because prices have moved against you.

The mkt making hft algos will cancel their orders when price is moving against them, (can you cancel as fast as them?) while getting hit when price is going nowhere. That is their edge against the average guy.
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Okay...? I don't understand what your point has to do with tapereading or even adverse selection. You are not obligated to trade or make markets. If you choose to continue to trade, find another way to do it where this type of activity doesn't affect you as much.

In my experience, hft does not have as big of an impact on my trading as you're suggesting neither am I dumping a position and 'exiting at a loss of 1 tick or more because price has moved against me'.

HFT is not the only game in town. Predicting what's going to happen in the next thousandths of a second is overrated. Tapereading is not hft.
 
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mbondy said:
I could literally answer this question with a one page response but I will keep it short.

99% of the time I'm adding liquidity. Keep in mind I trade stocks, not futures, and with the rebate passthroughs on various ecn's using various routing strategies, most of my trades are either negative commission or close to (meaning I get paid a small fee to trade). I prefer to get paid to trade rather than the other way around.

Second, my entries are generally not at the nbbo. Typically, I'm entering in an area either above or below the current best bid/offer somewhere based upon my expectations at the time and therefore, I'm not fighting for a spot in line at the nbbo when price gets to my entry. There are other ways to jump the queue but I won't get into that. When I exit, I offer out. Occasionally I will hit out but even then I can use a take/make exchange to reduce my fees.

My understanding of adverse selection is from the specialist days when they were obligated to make markets with players they KNEW were better informed than they were. I am neither making markets nor looking to capture the spread. Sure hft can game my orders but my agenda is very different than what they're doing.
More...


What type of stocks do you prefer to trade?

Liquid / thin volume,
Price range,
Other characteristics?
 
777 said:
What type of stocks do you prefer to trade?

Liquid / thin volume,
Price range,
Other characteristics?
More...

Liquid stocks, lots of volume, usually under $30 for in-plays, nothing special. I have other strategies for trading big caps or SPY.. I cut my teeth trading those so I am always watching and will trade when there's opportunity.

You?
 
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mbondy said:
Liquid stocks, lots of volume, usually under $30 for in-plays, nothing special. I have other strategies for trading big caps or SPY.. I cut my teeth trading those so I am always watching and will trade when there's opportunity.

You?
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Sending you a pm.
 
mbondy said:
99% of the time I'm adding liquidity. Keep in mind I trade stocks, not futures, and with the rebate passthroughs on various ecn's using various routing strategies, most of my trades are either negative commission or close to (meaning I get paid a small fee to trade). I prefer to get paid to trade rather than the other way around..
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Is that available to the average trader or do you have to be part of a group to get it?
 
mbondy said:
Okay...? I don't understand what your point has to do with tapereading or even adverse selection. You are not obligated to trade or make markets. If you choose to continue to trade, find another way to do it where this type of activity doesn't affect you as much.

In my experience, hft does not have as big of an impact on my trading as you're suggesting neither am I dumping a position and 'exiting at a loss of 1 tick or more because price has moved against me'.

HFT is not the only game in town. Predicting what's going to happen in the next thousandths of a second is overrated. Tapereading is not hft.
More...

Although I don't trade stocks, I agree with those that have a different experience as yours and their experience is supported by articles like Credit Suisse: Here's how high-frequency trading has changed the stock market @ http://www.businessinsider.com/how-high-frequency-trading-has-changed-the-stock-market-2017-3/#higher-trading-volumes-1

Yet, I do know that HFT has helped spreads to become tighter in comparison to 10 years ago.

wrbtrader
 
wrbtrader said:
Although I don't trade stocks, I agree with those that have a different experience as yours and their experience is supported by articles like Credit Suisse: Here's how high-frequency trading has changed the stock market @ http://www.businessinsider.com/how-high-frequency-trading-has-changed-the-stock-market-2017-3/#higher-trading-volumes-1

Yet, I do know that HFT has helped spreads to become tighter in comparison to 10 years ago.

wrbtrader
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I don't think anyone here is arguing that hft hasn't had an impact on the market. But I don't see the relevance of the argument as it pertains to tapereading.
 
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