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Automating for a 1 tick scalp?

  #11 (permalink)

charlotte nc
 
Trading Experience: Master
Platform: ninjatrader
Broker/Data: NinjaTrader
Favorite Futures: Emini (ES, YM, NQ, ect.)
 
Posts: 379 since Jan 2015
Thanks: 69 given, 919 received

Hi Revan,

I am glad that this info was useful. Regarding your question on what types of tools / strategies are out that could help someone aim for 3-5 ticks and have some decent predictability. There are some things that could potentially help you see such opportunities. If you get the kind of information that I provided in real time and are able to partition the data into these types of buckets, you can get a fair sense of direction like this.

1. Market Order bias over the last K number of price levels / time, etc. Look for areas where one side definitively has more market order interest that the other. This is backward looking.
2. Analyze the adjacent strong side volumes on the best bid / best ask. If one is definitively weaker than the other and this aligns with the side that is getting more market order action, you have a fair shot at a push...
3. If you look at the level 2 data. In my example data I showed the top 5 levels of the bid and ask resting. If you have the top 1-3 levels also showing weaker support vs. the other side, and this is the same side that has more market order action, and a weaker level 1 starting volume on each flip. I would say you have a fair bet.

If you can quantify a confluence of these 3 types of things and you have a decent limit order queue position and are likely to get filled properly..... Then this is your path to success. There are tons of permutations of different bets like this, but this one would be an ideal setup with lots of signs all pointing to the same thing.

You can also get a fair edge by setting your risk reward ratio in line with market volatility level. Here is how this works.

1. For low volatility trading times, set your stop losses outside of the range that the market is moving, and set your profit target inside the range the market is moving, put it tight and in all likelyhood it will bounce in this smaller range several times before it breaks out of this range and potentially hits your loss. So even if you pick the wrong direction initially, even if you get toxic fills, you can still recover and hit your PT easily.

2. In high volatility trading times, set your profit target > your stop loss. If the market is moving up and down in 10 tick blocks every minute, then you are just as likely to hit a 5 tick move as an 8 tick move. So just set your profit target higher than your stop loss but still reasonable for the range. You will still end up with 50% / 50% odds of hitting either, but the tick value will be higher.

You can code all of the logic I shared and with the right adjustments have some success with these approaches.

But outside of this I honestly don't think there is much else....

Just my two cents though....

Ian



Revan View Post
Cheers for the information, I am not the guy that has the infrastructure for HFT, I am already getting the type of results you mentioned on the sim, my estimated position is always near the back of the que, the market trades and while I'm waiting for my fill the order flow changes it's direction, one idea to counter this would be to scratch often, very often but it doesn't seem all that desirable does it?

This thread has answered my questions regarding the requirements of these types of orders, upon thought I feel what I need to do is forget one tick and go for identifying runs of momentum to get 4 or 5

But what strategies identify momentum across multiple ticks, when you can't see the order flow (at least tick for tick), I think there are methods that exist but I am not familiar with them yet, they will be key to my approach considering the demands of HFT, perhaps some kind of volume profile study etc but I'm not sure.



Thanks for saving me time and headache Ian, Kudos.


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