BlueHorseshoe

I think that this is only a fair argument in so far as one supposes that the markets exist to serve institutions moreso than they exist to serve HFTs. Where an insitution is acting on behalf of a producer/consumer who needs to hedge risk in the underlying, or where the institution represents mutual funds or, generally, the retirement assets of the typical citizen, then this may be true. If the markets were regulated to benefit institutional trading, would this really be fair? BlueHorseshoe

Do markets need to slow down, or retail traders speed up? Why is no company bulk-renting colocated server space, breaking it down, and sub-letting to retail traders? Is there no market for this? Do exchanges prohibit it? BlueHorseshoe

Or maybe their system was 'screw up then get bailed out', in which case it's still working pretty well! BlueHorseshoe

Hi Predictor, I'm no expert in these things, so the description that I gave is just one possible explanation. I think quote-stuffing patterns are slightly different, however. They tend to involve order bursts at rates in excess of 8000 quotes per second, whereas the patterns here are continuous cycles, typically operating throughout an entire session. Also, with quote stuffing the aim is basically to try and scupper the servers of one or more exchanges to enable the stuffer to benefit from the resultant latency arbitrage. Hence there would be no need to produce the fancy geometric patterns we see here - rather, the aim is to get as many orders in as quickly as possible. Nevertheless, quote stuffing is a phenomenon that would be perfectly suited to this thread, so I'll try and find something interesting on it to post in the next couple of days! Cheers, BlueHorseshoe

Ha! Yes, apologies for the slightly melodramatic title - it's just an easy way to get people to view the thread. BlueHorseshoe

Hi zdo, Thanks for an interesting post. Would you be willing to expand a little on the distinction you're making between programming and training? Cheers, BlueHorseshoe

The first chart attached below shows a stream of orders sitting overhead. These orders are placed above the market at price levels where they will never be likely to interact with the bid. They don't serve any obvious function in the market. What is significant is that the orders streams manifest as geometric patterns that become apparent in sub-second timeframes. Sometimes these patterns evolve on a price axis, sometimes on an ordersize axis (ie at a constant price), and sometimes combine both (order size diminishing as the last traded price is approached, say). See the second attachment. What possible purpose could such orders serve? One possibility is that they allow the producer to introduce apparently random noise into the market with the intention of confusing other market participants. But because the producer knows the underlying algorithm generating the orders, this firm can then cancel out the noise from their own data. Many HFTs are, we're told, well versed in procedures for cancelling out noise to produce an accurate estimate of a system's underlying state (many of their developers coming from backgrounds in speech recognition and encryption) - but what could be easier than cancelling out noise when one is adding that noise in the first place, and it is governed by a simple formula? Maybe you never look at the Matrix or DOM more than three or so tiers away from the last traded price, so how could this affect you? Because other market participants do, and then they act by executing orders, and also by cancelling them. So the next time you're about to act on any kind of information derived from the order flow of other traders, you might wish to consider whether these traders are themselves acting under a misapprehension induced by the pretty patterns an HFT is drawing 30 points overhead . . . BlueHorseshoe

Purchase puts on the stock of your brokerage firm?

It's stating the bleeding obvious, I know! But then when I started out I pretty much jumped in head first with a live account, in part perhaps because I didn't even know sim existed. It's easy to forget what it's like to be completely new to trading, especially for those of you who have many more years experience than myself or the thread starter. BlueHorseshoe

Hi Tim, If this is true (I would certainly tend to agree with you), then surely the solution is to take the trader out of the trading system as much as is possible? BlueHorseshoe

My sentiments totally echo those of BlueHorseshoe's previous post: BlueHorseshoe

Hi Steve46 (fourty-six), I love how you have started to reference yourself in your own post - can I ask where the inspiration for this came from? It's like some kind of postmodern feedback loop of recurrent, self-congratulatory pomp - AWESOME! BlueHorseshoe ps. I hope you don't mind if I start doing this too?

Hi Steve46 (fourty-six), I really admire the way you write! At first I wasn't sure what you meant by 'two' and was really confused . . . but then you were kind enough to put the number in brackets afterwards, and suddenly a lightbulb went on in my stupid head! TL would be a much worse place of there weren't articulate people like you around to explain things for the slower folks like myself . . . BlueHorseshoe ps. I (myself: the first person) hope you don't mind if I adopt this same stylistic technique in my own writing? (question mark)

If you look on the CME website there's a link. Not sure it's quite as straighforward as the first post might lead you to believe though (though, obviously, it's not impossible!). And unless you're doing a serious number of round trips or want to trade on the floor, you might do just as well to try and talk your broker down on commissions. Hope that's helpful. BlueHorseshoe

You're damn right we're aren't! BlueHorseshoe

The following quote is from an article interviewing Stephan Kraus, Vice President of Institutional Equity at Deutsche Börse. It would seem to suggest an interesting alternative to the "circuit breaker" approach employed in the US.

Well done you! That's really great . . . But I won't divert you with further congratulations - I'll let you get back to your main business in this thread of trolling Predictor and belligerently knashing your teeth at anyone else who might happen to disagree with you BlueHorseshoe

Maybe 'discredit' was a strong word . . . It was a comment from you a month or two ago that originally prompted me to consider the tactic/strategy dichotomy, and convinced me that I would be unable to wring any further significant value out of the kind of optimisation saturated approach I had hitherto adopted. Thanks for the easylanguage info. Is there any way to peer deeper into the order book with EL - for instance to return the bidsize at the current best bid minus 1 tick? BlueHorseshoe

Take a look at the two attached images. The first shot shows a sharp drop in the price of an FX pair over the course of 200ms. The sub-pane purportedly shows the order streams of a number of HFTs, measured on the left hand axis by distance from the current best bid. The close up shows the decline again. Notice that four of the order streams move their bid deeper into the order book 60ms before the drop, and another two do so 2ms before, so as to avoid a fill. Quite apart from the formidably impressive fact that it is possible for an algorithm to produce an on-line estimation of the status of another HFT’s orders, there is the apparent ability of the tracked algorithms to identify a price decline before it occurs, and to implement a defensive response in milliseconds. What did they see that you don’t? Could you detect the activity of a single participant in a multitude of orders on a tick by tick basis? If you don’t know the math, it might as well be magic. If you’re day-trading, this is the sort of opponent you’re up against on a daily basis. These are the capabilities of those who may take the other side of your position. Personally I would find that thought deeply unnerving . . . BlueHorseshoe

I couldn't have described better for myself the way that I perceive a tactical edge to differ from a strategy. Although my programming skills and experience may be no match for yours, Onesmith, I rather think that your joke discredits me - my understanding of effective development processes is certainly beyond "optimising for sweet spots", and I can't remember the last time I viewed an optimisation report. Of course, if you want to continue believing that I spend all my time optimising inputs, then feel free . . . BlueHorseshoe ps. in the meantime - do you know the answer to my bidsize question in the EL forum?

Yes Steve - I think the point that is been made (as with my point about realising multiple stops within an EL strategy) is that where you chose to build your own portfolio analysis in Excel or wherever, it was always possible to build your own portfolio analysis in EL if you had the necessary programming expertise . . . Just because you can't do something, don't assume that it's impossible! BlueHorseshoe

Can you give an example? Most things are possible. Onesmith kindly provided examples of code in 'strategies with multiple exits' thread. The lack of portfolio testing is/was a drawback - am I wrong in thinking that that even now this remains a pay-to-use add on? Nevertheless, TS is a fantastic piece of software. Couldn't agree more! BlueHorseshoe

It's fascinating to see the possibilities of importing discretionary results into TS. A formal extension of what you describe here would be the use of genetic algorithms. Not only would this allow you to eliminate less successful candidates, it would also breed new solutions without further input from yourself - this can always throw up useful and profitable suprises that a trader might never have thought of themselves. Hope that helps! BlueHorseshoe

Sorry, obviously Risk:Reward ratios aren't really relevant to daytrading the e-mini futures, despite the discussion amongst thread regulars . . . That's it now - I'm taking my bat and ball home!!! BlueHorseshoe

I can't - I don't know the expected probability distribution associated with your entries. You should though If your entry had no edge whatsoever (like a random entry) then you could assume a gaussian distribution around your entry price, so that with a two point stop and a two point target there would be a 50% chance of each order being elected, and the risk reward ratio would be as follows: (2*0.5)/(2*0.5)=1/1 In other words, with a random entry, over a large enough sample size, and identical stop loss and profit target, then the R:R would be 1:1. I'm sure you can work out what happens from there as you start increasing/decreasing either the stop size or the profit target . . . BlueHorseshoe