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The market is not out to get you
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The market is not out to get you

  #41 (permalink)
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The attachment shows the futures that have the highest liquidity as of April 2012.
(I look at this from traders.com but there's probably something better out there.)

The attachment isn't that important, it's just there for a reference.

Now, just some loose talk about trading.

In the past it was just humans (mostly men) trading.
Then it was humans and computers programmed by humans.
In a number of years, it could be nearly only computers programmed by humans.

I was wondering what would happen if a given future, like gold, was traded to
the extent of >99% by computers using HFT algorithmic trading programs. Perhaps
gold already is, I don't know.

Could we see the end of trading for individuals at home within 10 years?





-------------------------------------------------------------------------------------------------

A special class of algorithmic trading is "high-frequency trading" (HFT), in which computers make elaborate decisions to initiate orders based on information that is received electronically, before human traders are capable of processing the information they observe.

A third of all European Union and United States stock trades in 2006 were driven by automatic programs, or algorithms, according to Boston-based financial services industry research and consulting firm Aite Group.[4] As of 2009, HFT firms account for 73% of all US equity trading volume.[5]

In 2006 at the London Stock Exchange, over 40% of all orders were entered by algo traders, with 60% predicted for 2007. American markets and European markets generally have a higher proportion of algo trades than other markets, and estimates for 2008 range as high as an 80% proportion in some markets. Foreign exchange markets also have active algo trading (about 25% of orders in 2006).[6] Futures and options markets are considered to be fairly easily integrated into algorithmic trading,[7] with about 20% of options volume expected to be computer generated by 2010.[8] Bond markets are moving toward more access to algorithmic traders.[9]

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  #42 (permalink)
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Big Mike View Post
The institutions may not care about 1 single retail trader trading from his mom's basement in his underwear, trading 1 lots.

Or even trading from his basement in his moms underwear...

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  #43 (permalink)
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DionysusToast View Post
Or even trading from his basement in his moms underwear...


everybody's a comedian

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  #44 (permalink)
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stephenszpak View Post
I was wondering what would happen if a given future, like gold, was traded to
the extent of >99% by computers using HFT algorithmic trading programs. Perhaps
gold already is, I don't know.

Could we see the end of trading for individuals at home within 10 years?

First post "propers", and thanks to Mike et al for the opportunity to be here...
IMO Until the SEC creates a larger barrier for entry (a la PDT rule), I don't see that happening. When I looked into futures trading a few years ago all the talk was there about Algos and HFTs killing the little guys, retail being a suckers game, go prop or go home, etc. In spite of this, I'm here along with plenty of others, retailing away...
Ultimately, I believe that trading is a great opportunity. And until they take that opportunity away, there will always be people willing to take the risk.

Respectfully,
BlackSwan

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  #45 (permalink)
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DionysusToast View Post
Or even trading from his basement in his moms underwear...

What about trading from his mom's underwear in his basement?

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  #46 (permalink)
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BlackSwan04 View Post
First post "propers", and thanks to Mike et al for the opportunity to be here...
IMO Until the SEC creates a larger barrier for entry (a la PDT rule), I don't see that happening. When I looked into futures trading a few years ago all the talk was there about Algos and HFTs killing the little guys, retail being a suckers game, go prop or go home, etc. In spite of this, I'm here along with plenty of others, retailing away...
Ultimately, I believe that trading is a great opportunity. And until they take that opportunity away, there will always be people willing to take the risk.

Respectfully,
BlackSwan

Today everything is fine. I was just wondering what would happen if the computers began to almost entirely compete with computers.

The attachment shows companies with computerized trading that are near the Carrier
Hotel in New York City (where the internet's physical wires themselves come into the city) receiving data 8 microseconds ahead of the other companies at the lower left of
the image. Supposedly this actually makes a difference. (So computers are up against computers already to
an extent.)


Maybe in time the volatility that exists at the <.1 second time frame will increase greatly. I don't think many
home traders will be trading if there are twenty 10 tick moves in a futures contract occurring every second.
For one thing, what company is going to be able to provide data that is so so close to real time? I mean
<5 microseconds of delay. Even if you got the data that fast, the trades from your home to your broker would
take many microseconds to get there.

The daily volatility could still remain the same though. A daily graph of the 6E, or whatever, would/could have
the same average daily range over XXX trading days. The daily graph wouldn't necessarily change, though
intraday trading would be almost impossible for the average Joe at home.

I'm not saying I really believe this is the way things will be. It's just loose talk.

(Attachment lifted from video below. 10:42 point of video to the end of video is relevant.

Kevin Slavin: How algorithms shape our world - YouTube

- Stephen

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  #47 (permalink)
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Cloudy View Post
I'm of the opinion it's HFT causing all those spikes on so many markets now on too many bars. They trade all the time even during low volume. Never stops, never gets tired like a Terminator lol. So maybe not personally out to get any individual retail trader, but makes it harder to see price action on small time frames and can affect overall short term sentiment with all those spikes.

Here's an enlightening video by 60 minutes. Old now, but interesting to see how all the real big firms refused an interview while a smaller independent hft shop was ok with it.

Wall Street: The speed traders - 60 Minutes - CBS News

anyone remember Assembler language?, on the IBM 360/370 series mainframe?, long before there was a Unix? Actually the mainframe languages were all based off the Bell Labs original operating systems languages we have come to know as UNIX, including the IBM variants upon which they based their mainframe languages and operating systems.

One variant of the HFT's black box methods are the hard coding of their instruction sets in the equivalent of Assembler at the microchip level. What this does is achieve an operating state of: "as close to the BIOS (basic input output system) level". What that does to the uninformed, is cut out about three essential middle-men and makes doing the same tasks infinitely faster than any other application, especially those using an operating system, a programming language, a hosting facility (server platform), and such. By locating their trading concepts on the hardware layer, in micro-code (assembler equivalent), there are no servers involved. As such, by building their customized black boxes and locating them in the co-location facility, you can only begin to understand what that video was alluding to, in terms of "that's proprietary".

Really it isn't.

What I am concerned with, is, is anyone following the WSJ series of recent articles following the SEC's inquiry progress into how these HFT's and alternate broker/exchanges operate? Many of them use deception in lieu of full disclosure of their posted prices, so that this claimed: "we add liquidity and do the markets a tremendous service", are really false statements and they're doing just the opposite.

They say that shinning light into the dark, seedy underside of politics is the only way to cleanse, well, it appears the same is happening with these HFT's.

Good trading to you....

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  #48 (permalink)
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kronie View Post

"we add liquidity and do the markets a tremendous service"

Perhaps liquidity in the future will only exist between the algos.

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  #49 (permalink)
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Gary View Post
What about trading from his mom's underwear in his basement?

lol - hadn't considered that...

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If its the Futures Markets. Everyone is out to get you !!!

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