Algo Trading



My bro is a trader at an investment bank. He has a strategy that is pretty good ROI backtested in Bloomberg. Just needs to be able to code for one of the trading platforms available on the open market.
 
Be very careful. Automated trading can be extremely profitable when executed properly, as evidenced by the huge shift toward automated trading by the industry as a whole, but it carries a lot of risk. I wouldn't even dabble without a plethora of trading experience.
 
cassius said:
Be very careful. Automated trading can be extremely profitable when executed properly, as evidenced by the huge shift toward automated trading by the industry as a whole, but it carries a lot of risk. I wouldn't even dabble without a plethora of trading experience.
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Two different things probably. The algo trading that the big boys do is generally arbitrage trading trying to win a few miliseconds over other banks trading algo. Several companies for that reason have extremely high speed cables only for this reason.

But algo trading in general is no more risky than manual trading. Just have to consider everything about the trade and of course use proper stop loss.
 
rusvik said:
Two different things probably. The algo trading that the big boys do is generally arbitrage trading trying to win a few miliseconds over other banks trading algo. Several companies for that reason have extremely high speed cables only for this reason.
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Yes, the majority of automated trading done by the major firms consists of various forms of HFT arbitrage like scalping, but numerous strategies are employed by different firms, especially trend-following strategies. Automated trading now makes up a majority of overall volume on US and European exchanges. Algo trading is constantly developing and the biggest firms now pay to have their servers at the exchanges themselves running their HFT algos.

rusvik said:
But algo trading in general is no more risky than manual trading. Just have to consider everything about the trade and of course use proper stop loss.
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That depends completely on the specific algorithm in question. The Crash of 2:45 is a great example of the different type of risk you carry with automated trading. The wrong stop losses running in your algo on that day could have cost you 10% of your capital in less than ten minutes. This is why I suggest staying away from automated trading without vast prior experience in trading.
 
right, sorry for triple replying here like a tool but mixing algo trading and binary options (basically gambling) would be quite neat.
 
Medici said:
right, sorry for triple replying here like a tool but mixing algo trading and binary options (basically gambling) would be quite neat.
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Neat, but far off, I think.

Algorithms is about market participation, in fact, it's everything to algo trading.

Binary options are non-participatory, ie. bullshit. A good way to think of it is a binary option is like a football bet. Terms are met ($50 on Baltimore getting 4 pts // $50 that AAPL closes higher than $450), event transpires (Balt 34, SF 31 // AAPL closes $458), and accounts are adjusted accordingly.

Algos are 180 degrees different by realizing value in the marketplace itself. For instance, say a series of almost imperceptible events triggers a "buy" call for a particular algorithm - the algo then buys AAPL nanoseconds before other algos and whatever else that starts to buy the stock - stock goes up, our nimble algo was there first and can sell the position at a profit. The algo's value is realized in direct marketplace participation. And since those nanoseconds count, I have trouble envisioning how a cross platform application could be nimble enough to be effective - and that's before having to straddle two different objectives.

It's interesting to consider, though. Maybe a strategy is possible, I'm not familiar enough with cutting edge HFT capability to say for sure.
 
I agree with you. My thinking was more along the lines of pattern recognition as in forex algos.


infoslob said:
Neat, but far off, I think.

Algorithms is about market participation, in fact, it's everything to algo trading.

Binary options are non-participatory, ie. bullshit. A good way to think of it is a binary option is like a football bet. Terms are met ($50 on Baltimore getting 4 pts // $50 that AAPL closes higher than $450), event transpires (Balt 34, SF 31 // AAPL closes $458), and accounts are adjusted accordingly.

Algos are 180 degrees different by realizing value in the marketplace itself. For instance, say a series of almost imperceptible events triggers a "buy" call for a particular algorithm - the algo then buys AAPL nanoseconds before other algos and whatever else that starts to buy the stock - stock goes up, our nimble algo was there first and can sell the position at a profit. The algo's value is realized in direct marketplace participation. And since those nanoseconds count, I have trouble envisioning how a cross platform application could be nimble enough to be effective - and that's before having to straddle two different objectives.

It's interesting to consider, though. Maybe a strategy is possible, I'm not familiar enough with cutting edge HFT capability to say for sure.
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Algo trading is nothing more than mechanical trading been automated.

Of course institutions and prop shops tend to lean towards the HF side of algo trading which frankly unless your co-located or have access to data miliseconds before anyone else then it is pointless to scalp the ticks like this.

It is only accessible to deep pockets and well structured trade firms, not the general public. But since the 'news' is all raving about HFT it becomes a trend for wannabes aswell, yet the best way to exploit algo trading is to trade on bigger market movements on a directional basis as opposed to hedging or arbitraging.

The last i heard of HFT arbitraging was from some dudes who where pulling in 200k-300k per day. Thats what attracks everybody to it.
 
the only way to really trade the market without risk is in the arena of arbitrage, and there are so many big players in the arbitrage market that its not even worth considering for the individual.

everything else is pure gambling. for non-institutions, all strategies such as pairs, binary, technical analyses, etc, they're all bunk. complete horseshit. everybody knows somebody who knows somebody who did X with Y strategy... all BS anomolies.
 
drave said:
the only way to really trade the market without risk is in the arena of arbitrage, and there are so many big players in the arbitrage market that its not even worth considering for the individual.

everything else is pure gambling. for non-institutions, all strategies such as pairs, binary, technical analyses, etc, they're all bunk. complete horseshit. everybody knows somebody who knows somebody who did X with Y strategy... all BS anomolies.
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Have you traded forex/commodities?

I started about 3 years ago and traded for about 1.5 years. About 6 others and I were tutored by a guy who had earned mid 7 figures purely from currencies. I didn't add up total revenue but it was easily in the 6 figures for myself and I know a few of the others made far more. I was taking profit out monthly since it was my main source of income at the time, in hind sight I should have left it in but never mind.

Point being that retail forex is designed to take money from the average person who thinks he can make some money playing the markets. STP brokers make money regardless, they get paid something like $28 per lot traded (those are the ones you want to be an affiliate for).

Having seen some Fx companies trader earnings, there are quite a lot of individuals making money (well into 6 figures) in retail Forex. While all the gimmicks that eToro like to push will reel in the average person and make them think they can make money, there still is a place for technical analysis. I had a pairs EA that made £16k in 3 days.
 
Delaney said:
Have you traded forex/commodities?

I started about 3 years ago and traded for about 1.5 years. About 6 others and I were tutored by a guy who had earned mid 7 figures purely from currencies. I didn't add up total revenue but it was easily in the 6 figures for myself and I know a few of the others made far more. I was taking profit out monthly since it was my main source of income at the time, in hind sight I should have left it in but never mind.

Point being that retail forex is designed to take money from the average person who thinks he can make some money playing the markets. STP brokers make money regardless, they get paid something like $28 per lot traded (those are the ones you want to be an affiliate for).

Having seen some Fx companies trader earnings, there are quite a lot of individuals making money (well into 6 figures) in retail Forex. While all the gimmicks that eToro like to push will reel in the average person and make them think they can make money, there still is a place for technical analysis. I had a pairs EA that made £16k in 3 days.
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sure i have, i worked on wall street and later traded for myself long enough to see the truth. are you currently earning mid 7 figures consistently like the guy you tutored from? if so, bravo & explain on. if not, point made.
 
drave said:
sure i have, i worked on wall street and later traded for myself long enough to see the truth. are you currently earning mid 7 figures consistently like the guy you tutored from? if so, bravo & explain on. if not, point made.
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How much did you lose when trading for yourself? Again, I'm still honestly interested in knowing why you have such a distaste for trading. Is it only day trading or any sort of investing in the stock market?
 
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