My direct access broker suggested I trade something other than $NQ
I reported the following to my broker, what I think is predatory behavior wrt my $NQ trades.
#1 the moment I trade long or short, price moves a tick or two or more lower/higher away from my cost rather quickly I calculated in avg 100ms.
#2 If I use wide stops, when it reverts back it rarely crosses above/below my cost for long/short trades
$NQ total rth volume is about 250k, or 10.68 contracts/sec [lot less during most of the day], and just 5 contracts if i take one side buy/sell. Seems to me that on a 1 second timeframe, even 1 or 2 contracts are not meaningless if they make 4pts ~$200 within 60-90ms for some algo.
The reply was that they submit my orders to globex queue and have no influence on what happens to it thereafter.
Which is ok, but has me wondering how any hft algo knows where my average cost is?
So I figured
#1 the message signature sent to globex gives hft's some information about origin of the order, so they know its retail?
#2 My order can be tagged a retail order just by looking at the tick data stream? Say 1 contract long when most are short, so they can flag it, I've looked and i don't see this.
#3 In mark lewis's book he mentions that TD sells customer data to Citadel Investment Grp, maybe the broker does something similar
#4 my broker trades against customers somehow, given globex is well regulated
I'll read the book you recommend but I'm not sure what to make of your reply.
You label my attempt at explanation as "conspiracy theory" because you are sure my observation is mere coincidence and that no form of manipulation is involved, yes?
Is there data/models/dom/tape I can look at to understand Continuous auction process, in trying to explain why price moved and why it wouldn't cross my cost price for a bad trade? Unless you mean such predatory activity is just part of trading..
Same views as @iqgod, I think your questions are well-intended but somewhat conspiratorial.
This seems like a truthful explanation.
No one knows where your average cost is besides yourself. Even if you offered an electronic trading firm a special feed that identified your trades, there's no reason why he would use it because:
(1) Information coming from your decisions is probably up to 300 milliseconds stale.
(2) My average profit from your 1-2 contracts is as low as 5 cents. Why would I pay for a special feed for so little benefit?
Only members are allowed to clear on the CME so even if there was any way to identify the origin of those orders, they would not say that it came from "shark505" but rather "Interactive Brokers" or something. I wouldn't trade against Interactive Brokers. In fact there's certain markets where we trade that my firm's name has an ID and we often actually choose to layer our trades through a few PBs/clearing firms instead, so no one can identify us. We don't have to do this on the CME though, we funnel most of our trades through a single firm and we're not in the danger of being identified by any other firm.
By the way, the CME are good guys. The bosses work nearly on the lowest floor of the building; there's no view from their offices. Guess where the former head of "HFT" at Citadel works now? On the 1*th floor of a 44 floor building. Guess where the evil guys who own the microwave tower at the end of Michael Lewis's book work? Their entrance is right next to an Urban Outfitters.
Guess where the purported heroes ("Flash Boys") of Michael Lewis's book work? The 30th floor of this pretty building at the mouth of Hudson River.
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).
I hope the IEX enjoys their window view and gets all the venture funding that they want, because they're going to need it.
The following 4 users say Thank You to artemiso for this post:
Your an anonymous retail trader, if your not making money your doing something wrong I'm sad to say as simple as, yes there trying to move the market in a certain way to make people lose but there not after your personal money.
When you understand that there creating fake moves to get nervous newbie retail traders to trade badly then you can exploit what there doing and profit from it.
NQ isn't what I'd scalp personally, barely has a 20pip range most days, Thursday was nice but Friday to slow.
Well, they're growing every month so far, and as I'm sure you know, already are doing equal or more volume than several exchanges (looks like they had 0.68% mkt share Thursday, awesome for them), so I wish them best of luck. Is there something you have against them, other than that they promote fairness, simplicity, and nullify many strategies of HFT, which you would probably be classified as (I presume, though I do not know)?
It sounds like you have read "Flash Boys." Understand that you are trading in a futures market, which has an entirely different structure than the US stock market? @artemiso and other HFT types would have to enlighten as to strategies used in a centralized futures market. But they are different (most of them anyway) than those used in the fragmented US stock market which has 13 exchanges, 45+ ATS's, and an entirely different set of regulations to be gamed by HFT.
In some stocks, even those thicker than you might imagine, I can stop it dead cold with a 10 lot or even a 5 lot (hell, in some stocks, even a 1 lot will do). This is the reality with thousands of stocks, all with penny spreads, 50+ trading venues to utilize, HFTs sitting in dark pools with the ability to subpenny my orders--I can greatly affect the stock with only 100 to 500 shares (forget about trying to trade anything more in these stocks, even getting a 1 lot filled can be next to impossible when they can subpenny you because of the "valuable" price improvement they're providing).
So, if you were trading stocks, you would have a much better case. However, as artemiso explained, it's not likely that this is the case for you. The best thing you can do is to focus on your trading.
For a centralized exchange like the CME, you are basically correct. But just to be clear, his #1-#4 are not that conspiratory in nature, if we're talking about the US stock market. Payment for retail order flow and trading against customers order is central to the whole structure of the stock market. Why do I get paid to remove liquidity on Boston and BATY? Because they're so nice?
Yes, the market as a whole is an auction, and I trade it that way every day. But it's also good to know that the system in place has not been designed and structured for your benefit. I can still have a positive view of the market and not let it affect my trading, but the market is not set up to give you any advantage; it gives the advantage to those who bring it the most money, and those entities are sometimes using a speed/technology differential to work directly against you (sometimes against each other). In 2013 HFT was 61% of trading volume on the CME--you do the math.
The following user says Thank You to josh for this post: