[Predictor]

Is it just me or does the ES seem to be making more Flash 2-3 point movements then historically? And is this another sign that HFT is active in the ES?

[Tams]

Originally Posted by Predictor »

Is it just me or does the ES seem to be making more Flash 2-3 point movements then historically? And is this another sign that HFT is active in the ES?

Who cares about HFT.

They can do whatever they want,
only the weak will be affected.

[TheNegotiator]

Originally Posted by Tams »

Who cares about HFT.

They can do whatever they want,
only the weak will be affected.

Erm, not sure on that one Tams. If you're a discretionary trader and the market 'snaps' against you, there's a good chance you'll get out of the trade either for

1-fear(which we all experience at some point, weak or not)

2-stops being hit with increased volatility

[Goals]

Good question. This would be a great subject for someone to explore maybe look at some historical charts or backtest....I don't have access to either, but if someone does please explain what you used and what the outcome was. I think many people think the institutional guys are moving the market and this old theory may be true, but if think of the numbers when it comes to retail investors. There are many more of them.

[ScottB]

I would say no, that does not indicate HFT is active in the ES (although it is) as HFT algos would not react in that fashion. All the HFT algos I have worked with/around would have taken one trade (maybe even 1 lot), cancelled away on the rest of their size and stayed out until the move was over.

I watch the DOM in the ES for hours every day and have logging software running metrics during much of this time. I have seen (and logged) many of the moves you are referring to and they appear to be large players unwinding a position (or alternatively putting one on).

If you watch carefully, they are clearing the book for multiple levels (I saw a 10 tick move the other day). To be able to do this would require either a market order (which is somewhat unlikely) or a marketable limit order otherwise the HFT players would have time to cancel.

One explanation is someone large is putting on or taking off a hedge of some sort.

Best Regards,
Scott

[Tams]

Originally Posted by TheNegotiator »

Erm, not sure on that one Tams. If you're a discretionary trader and the market 'snaps' against you, there's a good chance you'll get out of the trade either for

1-fear(which we all experience at some point, weak or not)

2-stops being hit with increased volatility

there is notjhing to be afriad of
"HFT fear" is just a trading action myth created for the noobs, by the noobs.
trading is trading
trading goes hyper, then goes slow, then goes hyper again, and the cycle repeats
if you know how to read the market,
you will find that the so called hft is just as apparant and as transparent and as easy to read as any other market participants.
sure there are exceptions,
but don't bblame it on hft
or mystify hft.
vendors like to exploit fear,
so thtat they can sell you a solution. LOL
and the fear of hft is just the ticket.

[Predictor]

I can tell you that I've met with proprietary trading firms where traders have access to millions of dollars and their traders are definitely feel that HFT is affecting their trader performance. Of course, they rely on getting a speed edge. Some of these firms have indicated they are moving away from discretionary traders or at least not hiring any new ones.

I agree that the changes are less noticeable on the longer time frames, if at all. However, for the active/very active day trading time frame then yes I think I'm seeing some changes.

And yes when the market moves too fast to see then its relevant for the discretionary trader who is trying to trade in real time because when the market moves too fast to see then obviously you can't react to it.

One way to test this would be to see if the depth of the book over the last couple years has changed.. There are at least 2 explanations:

1. The HFTs are making the market more volatile because institutions aren't using as many limit orders.

2. A study indicated HFT hasn't net/net changed the spread when accounted for trade size. This might suggest that HFT does decrease the movement in the market but at the cost of larger sudden movements (faster/larger). So, we get markets that don't go anywhere and then suddenly move a greater distance in a shorter period time.

[MightyMouse]

Originally Posted by Predictor »

I can tell you that I've met with proprietary trading firms where traders have access to millions of dollars and their traders are definitely feel that HFT is affecting their trader performance. Of course, they rely on getting a speed edge. Some of these firms have indicated they are moving away from discretionary traders or at least not hiring any new ones.

I agree that the changes are less noticeable on the longer time frames, if at all. However, for the active/very active day trading time frame then yes I think I'm seeing some changes.

And yes when the market moves too fast to see then its relevant for the discretionary trader who is trying to trade in real time because when the market moves too fast to see then obviously you can't react to it.

One way to test this would be to see if the depth of the book over the last couple years has changed.. There are at least 2 explanations:

1. The HFTs are making the market more volatile because institutions aren't using as many limit orders.

2. A study indicated HFT hasn't net/net changed the spread when accounted for trade size. This might suggest that HFT does decrease the movement in the market but at the cost of larger sudden movements (faster/larger). So, we get markets that don't go anywhere and then suddenly move a greater distance in a shorter period time.

Traders will make all sorts of excuses for their trading performance. HFT is a good excuse for poor performance. Anything is good as long as they don't blame themselves.