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flimbo

Tape Reading and HFT

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Hi there,

i started read about a tape reading but after i read some articles about High frequency trading i am worring if its still able to read the tape using Time and Sales when there are many companies using HFT ? :crap:

what is your opinion ?

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Hi there,

i started read about a tape reading but after i read some articles about High frequency trading i am worring if its still able to read the tape using Time and Sales when there are many companies using HFT ? :crap:

what is your opinion ?

 

If you are still entering trades with your finger and a mouse... I wouldn't get too concerned about it. If you consider system latency, then add the amount of time it takes for light to enter your eye, get processed by the brain (make some sense of the information), and send the signal to your index finger, you are probably 3 seconds behind the curve (at best).

 

Learning to read price action is a good thing... don't get too deep in the weeds though.

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Hi there,

i started read about a tape reading but after i read some articles about High frequency trading i am worring if its still able to read the tape using Time and Sales when there are many companies using HFT ? :crap:

what is your opinion ?

 

Hi Flimbo,

 

It's a good question. Everyone will have their own experience and their own answer, but I personally never had any success with it. I tried both the "stare at the T&S for hours and it will make sense" approach, and I have also spent a lot of time creating programs that attempted to make sense of the depth of book, and volumes crossing the spread with orders ("market delta").

 

I certainly don't think it's possible to compete with the HFTs for true scalping in any liquid futures market, even if you automate what you're doing.

 

In a less liquid market - a single stock for instance, the tape may still provide an advantage?

 

There's also the question of what you want to do . . . Say you're trading breakouts in the ES, entering a position intraday and then exiting at the close - being able to read market activity around breakout levels to gauge interest from buyers and sellers to identify optimal times to enter a position might be possible with practice. Trying to make this market by reading the tape, trading for single tick profits, I don't think will be.

 

At the end of the day, most of the information that you will need to make valid suppositions about other participant's actions is not made available. You either need a very clever mathematical way to estimate it, or to devise an approach that makes better use of the information that you do have.

 

Finally, the following thread might be of interest to you:

 

http://www.traderslaboratory.com/forums/day-trading-scalping/13811-daytraders-do-you-know-your-enemy.html

 

Hope that's helpful!

 

BlueHorseshoe

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Tape reading should not be looked at on T&S. That sort of thing ...well those days are over...unless you got deep enough pockets..and smart young wippersnappers to program faster and better htfs ..algos...and programs to detect the tape at the level the eye nor brain can read fast enough to make sense of it.....etc

 

The tape needs to be read in a more relaxed environment for the average trader. Not t&s but chart tape reading. Gann..livermore..wyckoff...looked at it in charts and also used the tape ticker with its printouts. Unless you got extremely fast eyeballs and a high octane brain forget looking at t&s to figure the tape out.

 

Just my 2 pennies worth...

 

Patuca

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I was in another forum and 73% of the respondents said that HFT does not affect their trading. I am in the 73% camp. I don't trade in front of orders and base my entries and exits on price action.

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I was in another forum and 73% of the respondents said that HFT does not affect their trading. I am in the 73% camp. I don't trade in front of orders and base my entries and exits on price action.

 

But how would they know? When they suddenly have to transact at worse prices, how would they know whether that was the result of HFT impact on a market?

 

BlueHorseshoe

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But how would they know? When they suddenly have to transact at worse prices, how would they know whether that was the result of HFT impact on a market?

 

BlueHorseshoe

 

The other question that comes to mind is... Does it really matter? I can understand the argument that large investment firms have with HFT. I mean you're trying to transact trades on millions of shares per day, and someone is front running your trades... pisser.

 

For me and my 3000 ms latency... price ticks up, it ticks down, and I catch it somewhere in the middle, or the high end, or the low end... for me it's a wash.

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The other question that comes to mind is... Does it really matter? I can understand the argument that large investment firms have with HFT. I mean you're trying to transact trades on millions of shares per day, and someone is front running your trades... pisser.

 

For me and my 3000 ms latency... price ticks up, it ticks down, and I catch it somewhere in the middle, or the high end, or the low end... for me it's a wash.

 

Is it a wash though?

 

Or can it cause you to be adversely selected a higher percentage of the time?

 

Consider this - you want to buy if price falls to X. You place a limit order there. The HFT is also bullish, and they have a limit order ahead of yours in the queue. The first order trades at X. Neither of you is filled. But the HFT suddenly gets spooked and recognises that price has some way still to fall. It pulls it's order for 1000 contracts. A seller crosses the spread and hits your bid, and price begins to fall . . .

 

Who knows what the HFT "saw"? But even if you saw the same thing, you couldn't have pulled your order as fast as they did. The speed with which they are able to abandon a market has caused you to be adversely selected for a losing trade.

 

The alternative is that the HFT remains convinced that X will be a bottom, and leaves its order in situ. Five hundred sellers hit the bid, you're not filled, and price rallies. Want to chase it with a market order? Well then a different type of HFT algo will be waiting to game you . . .

 

This isn't even about the HFT knowing anything you don't or couldn't know - it's about how fast they are able to respond to that information.

 

I reckon that if you can implement your strategy entirely with market orders (and those such as stops which translate into them) and make money, then that probably means you're outside the range where HFT can significantly impact your trading.

 

Regards,

 

BlueHorseshoe

 

nb. Having just read your other post: if your average hold time is 120 seconds and losing a tick here and there isn't enough to damage your profitability, then I am rather impressed and more than a little envious :)

Edited by BlueHorseshoe

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Is it a wash though?

 

Or can it cause you to be adversely selected a higher percentage of the time?

 

Consider this - you want to buy if price falls to X. You place a limit order there. The HFT is also bullish, and they have a limit order ahead of yours in the queue. The first order trades at X. Neither of you is filled. But the HFT suddenly gets spooked and recognises that price has some way still to fall. It pulls it's order for 1000 contracts. A seller crosses the spread and hits your bid, and price begins to fall . . .

 

Who knows what the HFT "saw"? But even if you saw the same thing, you couldn't have pulled your order as fast as they did. The speed with which they are able to abandon a market has caused you to be adversely selected for a losing trade.

 

The alternative is that the HFT remains convinced that X will be a bottom, and leaves its order in situ. Five hundred sellers hit the bid, you're not filled, and price rallies. Want to chase it with a market order? Well then a different type of HFT algo will be waiting to game you . . .

 

This isn't even about the HFT knowing anything you don't or couldn't know - it's about how fast they are able to respond to that information.

 

I reckon that if you can implement your strategy entirely with market orders (and those such as stops which translate into them) and make money, then that probably means you're outside the range where HFT can significantly impact your trading.

 

Regards,

 

BlueHorseshoe

 

I understand, but I think my best answer is... "I don't know for sure". For me to make money... I must place trades. This is a fact, regardless of who is doing what. That is the bottom line for me.

 

The whole term "HFT" probably covers a broad swath. You are talking anyone with more speed than you... most everyone creating volume in the market (this would include top end investment firms... all those fat cat dudes that are whining about HFT's). I think in a large part most of these shenanigans occur when markets are tightly range bound. I may be wrong about this but it's my perception. What profit is there in manipulating a market that is trending?

 

I think (and it is a humble opinion), if you are patient, and wait for your opportunities HFT should have little effect on your trading.

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The mm's of yesteryear and the specialist of course captured the spread in stocks which could amount to alot of money over the course of the session in a heavily traded issue. Htf's are basically doing the same thing but at a more micro level and of course at a much faster speed. Unless a person is micro scalping i dont see hft affecting trading that much. Not to say it can't but i would be more concerned about two or 3 htfs going rogue in a trading session. Nevertheless, we are all learning about hft's and may find it does affect us more than we first thought.

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Nevertheless, we are all learning about hft's and may find it does affect us more than we first thought.

 

I agree. It's difficult to know what goes on (beyond what you read, which may be lies and disinformation), but is that any different to in the past? How many people off the floor in the 80s knew what traders in the pits really did, or what strategies they used? How many people know that information even today?

 

Ultimately you've just got to trade with the information you have, or not trade at all . . . And though you may not know how you will fair in the future, you can at least know how you would have faired in the past, HFTs and all else included.

 

BlueHorseshoe

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I think (and it is a humble opinion), if you are patient, and wait for your opportunities HFT should have little effect on your trading.

 

That's literally the bottom line, really - if you can make it work then it works, and why even worry about HFT?

 

You can bet that the HFT algos and anyone else who profits in any other timeframe patiently awaits their opportunities, so you can only do the same.

 

The only reason I have ever concerned myself with them is due to the fact that the types of short-term opportunity I have identified have given such insufficient margin for error that market microstructure can erode 100% of the gains . . . But that's not relevant to anyone who can identify better opportunities intraday than I have been able to :)

 

BlueHorseshoe

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That's literally the bottom line, really - if you can make it work then it works, and why even worry about HFT?

 

You can bet that the HFT algos and anyone else who profits in any other timeframe patiently awaits their opportunities, so you can only do the same.

 

BlueHorseshoe

 

We've strayed some from the OP, but I have this framed and it's hung above my trading desk...

 

wait.thumb.jpg.280184ff308c80aee6b40e6ac5b977a1.jpg

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