[BlueHorseshoe]

Hi Audrey,

It might be helpful if you could define what you mean by 'algorithmic trading'. Technically, anything that involves a specific series of sequential steps could be considered 'algorithmic', such as starting my car, or making my favourite cocktail, but the term has generally become synonymous with High Frequency Trading.

Assuming that you have the latter in mind, you may wish to reconsider the topic of you thesis. HFT is dependent upon a distinct technological advantage that costs tens of millions of dollars. The maintanence of such a system, let alone its development, requires the input of dozens and dozens of people with world-class specialist experience and skills. In short, it's not something you can do in the back of your garage on a laptop, and the notion of an 'individual algorithmic trader' is nonsense.

I hope that this post comes across as constructive and is not just dismissive of your request.

[mickro]

Originally Posted by BlueHorseshoe »

Hi Audrey,

Assuming that you have the latter in mind, you may wish to reconsider the topic of you thesis. HFT is dependent upon a distinct technological advantage that costs tens of millions of dollars. The maintanence of such a system, let alone its development, requires the input of dozens and dozens of people with world-class specialist experience and skills. In short, it's not something you can do in the back of your garage on a laptop, and the notion of an 'individual algorithmic trader' is nonsense.

I hope that this post comes across as constructive and is not just dismissive of your request.

You should start with that quote.... I suppose it depends on definition. Check the SEC definition of HFT and you will be starkly suprised. I was suprised to find out that a system that I designed is considered a HFT system. And I designed it by myself, on X_86 gear. A $500 system that I now make a living off of. Preparing the paperwork now for a fund launch, so it is possible. I designed it in a garage, with a server running in a closet. lol

Check out Tradebot Systems in KC Missouri, they pocket $50k a day. Their solo designer started in a basement (no BS) with a $10k investment.

I think the big reason that individuals can do this now is solely because of technology. We have access to brokers and DMI. The Primes are still tough, but the small primes and mini primes all offer apis to connect. I think they all offer market data and pretty effecient order routing. Obviously, the primes have the the best algo's but you can't get an account with them without $1B(I think, it's up there) in assets. Government got this one right with reg NMS that actually helped out the little guy.

[BlueHorseshoe]

Originally Posted by mickro »

You should start with that quote.... I suppose it depends on definition. Check the SEC definition of HFT and you will be starkly suprised. I was suprised to find out that a system that I designed is considered a HFT system. And I designed it by myself, on X_86 gear. A $500 system that I now make a living off of. Preparing the paperwork now for a fund launch, so it is possible. I designed it in a garage, with a server running in a closet. lol

If what you're saying is true, then it would appear that I stand corrected! However, I'm assuming that you'd agree that you're in a very small minority of those who posess anything like the skill base to do so. To save me trecking away to read the SEC's definition, would you provide a summary? And, if you're willing to divulge the information, with what frequency your own system trades, and what type of instruments?

I'm guessing the paperwork involved in setting up a fund is as much hassle as setting up an HFT system, isn't it?

[mickro]

Originally Posted by BlueHorseshoe »

a very small minority of those who posess anything like the skill base to do so.

Thats the thing too, languages are getting easier. And you can use easier higher level languages anymore. I bet the trend continues. I've seen people using excel to trade, or a matlab, or an R plugin, that's a lot easier to learn than c++.

Originally Posted by BlueHorseshoe »

To save me trecking away to read the SEC's definition, would you provide a summary?

Well, it keeps changing... lol. One of the best reads and a must for anybody who hasn't read it is the concept release from the sec "concept release on equity market structure"
(1) the
use of extraordinarily high-speed and sophisticated computer programs for generating, routing,and executing orders; (2) use of co-location services and individual data feeds offered by exchanges and others to minimize network and other types of latencies; (3) very short time-frames for establishing and liquidating positions; (4) the submission of numerous orders that are cancelled shortly after submission; and (5) ending the trading day in as close to a flat position as possible (that is, not carrying significant, unhedged positions over-night).

Originally Posted by BlueHorseshoe »

And, if you're willing to divulge the information, with what frequency your own system trades, and what type of instruments?

I don't do a lot of fancy. I do a portfolio, which is different from a lot of the HFT guys. But I can still do a couple hundred trades a day.

Originally Posted by BlueHorseshoe »

I'm guessing the paperwork involved in setting up a fund is as much hassle as setting up an HFT system, isn't it?

Hassle is other peoples money. It's a regulated industry, so you have to pull your pants down in front of Barack to invest for other people... up to a certain point. I'm going the RIA route now.

Getting started you can trade a retail account which is easy to set up, but day trading restrictions are a gotcha.

[BlueHorseshoe]

Originally Posted by mickro »

Thats the thing too, languages are getting easier. And you can use easier higher level languages anymore. I bet the trend continues. I've seen people using excel to trade, or a matlab, or an R plugin, that's a lot easier to learn than c++.

Thanks for the resonse. I disagree with you about the languages aspect - I'm a perfectly proficient programmer in several languages, and pretty confident that I could teach myself C++ if I wanted. But I think the main barriers to HFT are broader technical issues - for example, I wouldn't have a clue about how to go about obtaining the low latency order routing that the HFTs enjoy. And I think that most people at the large HFT firms would be equally ignorant - it's my understanding that they tend to be made up of specialist teams, each of which only really understand their own job.

Anyway, as I said before, its impressive that you've managed to get such a system off the ground single-handedly, so good luck for the future and for your capital management enterprise!

[Predictor]

Algorithmic is not HFT. Traders have been trading algorithmically for years and thats been available to retailers for probably since the computer came out. As stated, HFT is distinguished by requirement for co-location,automation, and speed.

Some of the early definitions that came out originally wanted to say anyone who was a day trader was an HFT trader but that misses point completely.