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Ask me anything about hedge funds and HFT
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Created: by artemiso Attachments:3

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Ask me anything about hedge funds and HFT

  #71 (permalink)
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artemiso View Post
Aldridge doesn't deserve your $47, really. I just read through the entire Google Books sample and it is clear that it is still the same unoriginal content that was mashed together from a combination of Google and her LinkedIn contributors. There's no conspiracy to make the topic any less transparent to outsiders, except it reflects poorly on the rest of us when someone tries to represent your field and does a poor job.

Ok, thanks for your advice. I will wait on the local library to buy it sometime later. The only book I found of use so far is the 'All About High Frequency Trading' by Michael Durbin. But perhaps that too is not good enough??

Richard
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  #72 (permalink)
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RichardHK View Post
Ok, thanks for your advice. I will wait on the local library to buy it sometime later. The only book I found of use so far is the 'All About High Frequency Trading' by Michael Durbin. But perhaps that too is not good enough??

I haven't read Durbin's book so I can't give you a review on it.

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  #73 (permalink)
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Incredible thread artemiso, THANK YOU for taking the time!

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  #74 (permalink)
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ntvola View Post
Incredible thread artemiso, THANK YOU for taking the time!

@ntvola: No problem, thanks for reading.

I've been very busy in the last month. I just want to talk about business-related issues instead of trading per se.

1. I've once complained that the better you are as a trader, the faster they promote you to a position that is distanced away from the trading. I've learned this has some basis as my firm has been growing recently - I haven't had time to spend on my favorite research and self-learning past-times. In short, my advice if you're going to take this (or any other endeavor) seriously as a business: make sure you're the best trader (or programmer, fund-raiser etc.) on your team before you become a manager, because you have no time to improve your own skills when you're leading a team.

2. If you do any kind of startup, chances are that you will make enemies with at least 1~3 of the good friends you've used to have that started out with you. I'm not a lawyer and don't take my word for legal advice, but it's always good to settle all the equity split and profit sharing issues at the very start. Many people feel that it will become easier to divide the slices later when the pizza gets bigger, but to be honest, it only gets exponentially harder with passing time. If you think your share from the start is going to be too small, and you can't accept this, then you shouldn't be doing it.

3. In continuation to the above, I remember a story about Lewis Ranieri at Salomon Brothers. Everyone had expected him to become the next CEO, and he was on great terms with the incumbent CEO. One day he was called in to the lawyer's office by his boss. Whenever they had a meeting that could turn personal, they would meet at the lawyer's office. I think this is a really great idea... having met plenty of (the best) lawyers, it seems they're very good at turning you against anyone who isn't there at the meeting! To speak a good word for them, it's true that their conservative ways of dealing with people is also the least risky. Ranieri was fired at that meeting, and his closely-knit circle of Salomon traders didn't get to protest.

4. There are many, many ways to raise money if you know how to trade at an institutional-quality level. e.g. Collective2 is not one of them. This is just to let people know that (1) if you want to be a trader that deals with OPM, build a track record, (2) don't buy "trading systems" or "signals" because you'd think these people would have better means to raise capital if they were legitimate. Also, hiring someone for his connections and fund-raising ability is not a good idea because of this (besides how it could be illegal if you're not doing it right).

Good luck guys.


Last edited by artemiso; July 16th, 2013 at 08:10 PM.
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  #75 (permalink)
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Quoting 
4. There are many, many ways to raise money if you know how to trade at an institutional-quality level. e.g. Collective2 is not one of them. This is just to let people know that (1) if you want to be a trader that deals with OPM, build a track record, (2) don't buy "trading systems" or "signals" because you'd think these people would have better means to raise capital if they were legitimate. Also, hiring someone for his connections and fund-raising ability is not a good idea because of this (besides how it could be illegal if you're not doing it right).

Regarding hedge funds, and advice for those who aspire to manage OPM... what is the best way to build an institutional-quality track record? For example, how would an interactive brokers paper-trading account be received? Any other advice on basic requirements such as track record length, performance metrics, etc.?

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  #76 (permalink)
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See PM.


Last edited by artemiso; July 17th, 2013 at 09:22 PM.
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  #77 (permalink)
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@artemiso

I`d ask if volume analysis still has merit and is used for developing HFT,Mid/Short/Long - term strategies,or it`s diminished or become obsolete over time?Many HF managers i`ve spoken to,suggest using it,many do,as a matter of fact,but as i see their results are mediocre,at best.

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  #78 (permalink)
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Cachevary View Post
@artemiso

I`d ask if volume analysis still has merit and is used for developing HFT,Mid/Short/Long - term strategies,or it`s diminished or become obsolete over time?Many HF managers i`ve spoken to,suggest using it,many do,as a matter of fact,but as i see their results are mediocre,at best.

Are you referring to 'volume analysis' in general, or a specific form of 'volume analysis' that is popular in this forum? (Interestingly, one of the original reasons that brought me to this forum was because a friend of mine from a hedge fund in Switzerland said he was using "@gomi's volume ladder", and I did a Google search and ended up here.)

Regarding the latter, I haven't been using models that attempt to determine some underlying function that maps from the prices to volumes; I didn't think it was a meaningful pursuit after looking at gomi's source code, and if I follow the hypothesis for doing so, I would argue that there's more effective ways to do that.

Regarding the former, I've always used volume data in some way or another in my models in all of my career, in both long-term and short-term trading activities. Without mentioning exactly how we use it - it varies across traders anyway - I can say what you already know from public information and provide some additional reasoning to think about: The decision for a firm to carry out electronic market making in any market has always been a function of volume, among other variables (operational variables, e.g. data acquisition expenses, development time; market variables, e.g. bid/ask prices). Why would we flock to CME or NASDAQ/NYSE even though there's clearly much more inefficient markets out there? So clearly, we're making some kind of forecast where volume has some form of relationship (not necessarily correlation) with our returns.

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  #79 (permalink)
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artemiso View Post
Are you referring to 'volume analysis' in general, or a specific form of 'volume analysis' that is popular in this forum? (Interestingly, one of the original reasons that brought me to this forum was because a friend of mine from a hedge fund in Switzerland said he was using "@gomi's volume ladder", and I did a Google search and ended up here.)

Regarding the latter, I haven't been using models that attempt to determine some underlying function that maps from the prices to volumes; I didn't think it was a meaningful pursuit after looking at gomi's source code, and if I follow the hypothesis for doing so, I would argue that there's more effective ways to do that.

Regarding the former, I've always used volume data in some way or another in my models in all of my career, in both long-term and short-term trading activities. Without mentioning exactly how we use it - it varies across traders anyway - I can say what you already know from public information and provide some additional reasoning to think about: The decision for a firm to carry out electronic market making in any market has always been a function of volume, among other variables (operational variables, e.g. data acquisition expenses, development time; market variables, e.g. bid/ask prices). Why would we flock to CME or NASDAQ/NYSE even though there's clearly much more inefficient markets out there? So clearly, we're making some kind of forecast where volume has some form of relationship (not necessarily correlation) with our returns.

I`m not sure what type of volume analysis popular in futures.io (formerly BMT),but if you mean ''gomi`s volume ladder'' and further describe this as ''models that attempt to determine some underlying function that maps from the prices to volumes'',then yes,i`m reffering to exactly such models.So the question remains,if such type of volume analysis could be(or ever been)of any merit?

Furthermore,if all there is in the market,as you and some of the managers i`ve spoken to suggest is volume,then why the results are so poor,or even negative at times?

P.S.By more effective ways i guess you mean attempts to access order book or time and sales to achieve smth.Am i correct?

Thank you for your reply!

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  #80 (permalink)
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Cachevary View Post
I`m not sure what type of volume analysis popular in futures.io (formerly BMT),but if you mean ''gomi`s volume ladder'' and further describe this as ''models that attempt to determine some underlying function that maps from the prices to volumes'',then yes,i`m reffering to exactly such models.So the question remains,if such type of volume analysis could be(or ever been)of any merit?

I see, I did a double take and realized people call this "cumulative delta". As mentioned, I don't use such techniques; it's not up to me to conclude if there's any merit because it just means I haven't spent a lot of time with it.


Cachevary View Post
Furthermore,if all there is in the market,as you and some of the managers i`ve spoken to suggest is volume,then why the results are so poor,or even negative at times?

Well, in finance, the opposite of being "right" is being "random". "Poor or even negative sometimes" sounds to me like a random distribution of outcomes.


Quoting 
P.S.By more effective ways i guess you mean attempts to access order book or time and sales to achieve smth.Am i correct?

Just completely different models; better ways to transform that data into useful insights, and more accurate ways to sign the trades.

One issue is that you have to contend with is the cause and effect when you're counting volume in increments and using that to forecast that it precedes any impending volatility (or spikes or trends or whatever the practitioners call it in this space). Naturally, sizes of the individual transactions decrease as the order book depth thins, and any attempt to make a forecast using individual transaction sizes without removing this baseline phenomenon is going to be ineffective because your signal is dominated by the baseline phenomenon.

Also, the ironic thing is if you actually improve the signing of the trades, you'll often find that the performance actually decreases.

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