The Arms Race in High Frequency Trading
- Thread starter ASusilovic
- Start date
Bottompicker....correct....
But what happens when high frequency traders gradually kill off the population - take Bund/Bobl and Schatz on Eurex and 10/30yr on CBOT, not so long ago they were THE place to be but high frequency algos with deep pockets have cleaned out the smaller people - now daily volumes are pathetic and it's like watching a load of computer programmes battle it out. I actually don't even consider it trading, just very scummy and detrimental to market volumes and growth.
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And perhaps most importantly the base cheerleader camp must be broadly, diversely represented....
When all begin to play the same game....then either another process develops....or the base cheerleader camp dissipates....
But what happens when high frequency traders gradually kill off the population - take Bund/Bobl and Schatz on Eurex and 10/30yr on CBOT, not so long ago they were THE place to be but high frequency algos with deep pockets have cleaned out the smaller people - now daily volumes are pathetic and it's like watching a load of computer programmes battle it out. I actually don't even consider it trading, just very scummy and detrimental to market volumes and growth.
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And perhaps most importantly the base cheerleader camp must be broadly, diversely represented....
When all begin to play the same game....then either another process develops....or the base cheerleader camp dissipates....
It seems like a human being is capable of being smarter than the algorithms you are talking about. Can you not exploit the behavior of this algorithms to your benefit? It might mean widening your time horizons or trading with wider stops and with less size, but it seems like it can be done. At some point somebody will take these algorithms apart.
Sorry if I misunderstood, maybe I am not good at reading tone of voice online
yes.
You can recognize some algos some of the time, but not all algos all of the time. Algos, if my line of thinking is correct, require strict demarcated rules of which a truly discretionary trader is not bound. More and more discretionary traders are falling to the bots but we will survive... and thrive. A high velocity ping-pong game within a tennis match. Why play ping-pong if you are neither smart nor athletic? Screen time, screen time, screen time, who has that kind of patience these days. Who's gonna bleed for years and STILL turn on those screens knowing more pain waits? Everything is not what it seems and deceit is the rule of the day.
... of course most times, you'd be best asking a 5 year old which way he thinks that sqiggly line is going and you just get in and manage the position.
But what happens when high frequency traders gradually kill off the population - take Bund/Bobl and Schatz on Eurex and 10/30yr on CBOT, not so long ago they were THE place to be but high frequency algos with deep pockets have cleaned out the smaller people - now daily volumes are pathetic and it's like watching a load of computer programmes battle it out. I actually don't even consider it trading, just very scummy and detrimental to market volumes and growth.
it's called evolution, just like 5% kill off the other 90%, you just don't like being on the losing side
It looks like this type of trading is actually one of the few beneficial to society because it creates demand for programmers and hardware makers. We on the other hand sit at home and click a mouse to the benefit of noone but ourselves
it's called evolution, just like 5% kill off the other 90%, you just don't like being on the losing side
It looks like this type of trading is actually one of the few beneficial to society because it creates demand for programmers and hardware makers. We on the other hand sit at home and click a mouse to the benefit of noone but ourselves
Sure, but I don't pretend that prices will somehow fall exactly where they should, if such a thing even exists. My point is that price is like a woman. To you, she may be beautiful and you want to marry her, and to me she may be a one night stand or vice versa. Who is to say that on your time frame for trading/investing that the price you paid is an overshoot?
Oh no question about it. I didn't say they don't exist. I claim in this environment, they are in real danger of going the way of the Woolly mammoth if putting money to work at any price is the prime directive. In a market like we saw from 2003 - 2008, sure, but we may have entered a period where squeezing pennies count.
Right, that is why pits like the SPX options pit is so desirable if you know what you are doing. The thing is, this is done all the time and not just by mutual funds, but by traders. For example, I know a trader that makes most of his money taking paper down. He then negative quotes for edge to take the edge he got on the paper. So if he got say .15 of edge on 10000 straddles from an institution, he may be willing to quote and get picked off by Goldman Sachs for .02. Now, GS will do a study and say, some traders are insensitive to price, when in fact he was locking in a profit for .13.
It is all about timing and timeframe, and to generalize beyond that is potentially to come to the wrong conclusion.
Well, because HF programs job is to simultaneously play statistics against pockets of liquidity. Also, I don't see how HF can affect the price for a fund anyway. Shares bought must be sold, so if a program buys in front of a fund causing a temporary spike, those shares are sold back bringing back the price almost inline where it was before, or at least now the fund is buying the bid instead of the offer. And if the fund is gone, that very same HF program is now probably selling a fraction more than it buys, bringing the prices back to a cheaper level for the next fund. In fact, if I were a fund I would be more worried about the myriad of other ways that people front run these orders than some dumb program that is in it for .06 for 1 minute.
My friend, this is war and it happens all the time. We are option MMs and traders. People are always probing us with paper to see where we stand and whether we are buying vola or selling it. Brokers come to us with "shows" all the time from institutions. If we think the guy is just probing us (on behalf of a hedge fund), we eventually stop doing business with him. On the other side of the coin, funds that need to shop an size order will shop it upstairs first. Options market makers often adjust their vol curve based on the order, even if nothing executes! [depends on the source obviously, otherwise you could manipulate the vol curve just by pretending to have an order. Since we have eyes everywhere, we can tell if the order eventually filled or it was bogus]
Social implications of investing? LMAO. Seriously, people that think that markets have a social role should have their heads examined. If you want a safe and reasonable rate of return, put your money in bonds, and probably US treasuries at that. If you leave that safe heaven, you are gambling unless you are an arbitrageur. It may be reasoned gambling like playing Blackjack, but gambling nonetheless. If you make the rules such that there is no profit motif for people you will kill your own liquidity and the only liquidity left will be exactly that which you claim is bad because they front run orders, i.e., machines that don't need salaries and bonuses and don't mind picking up pennies with a bulldozer.
Rules are continuously evolving, and some of the rules are good and some are downright idiotic. This discussion is now heading into the realm of political philosophy, and I don't want to go there. This is almost akin to saying, was FDRs "New Deal" better or worse for America? I would spend a month non stop on that question, and I still don't know the answer.
Where did I say I was on the losing side? I've just had to adjust - find suitable markets for myself and adapt a style for today's modern markets.
Completely disagree with your second point too. Demand for programmers and hardware makers of that scale is hardly going to benefit society to a high degree - don't you pay a clearer? Who also needs to constantly update hardware and employ IT staff, back-office staff, use some sort of software provider who does the same? CQG or eSignal - the same, all providing jobs and stimulating the economy and in larger numbers to a degree that actually makes a difference.