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Noise: A source of your errors?


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Noise: A source of your errors?

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  #21 (permalink)
 Sandpaddict 
Langley
 
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Cutloss View Post
There is no debate about noise traders..retail versus informed traders institutional and professional money who get large orders from their customers for execution!

The Robin hood retail order flow allows the hft and execution desks to preplan and incorporate that data into the models to make sure they release n hold back buys n sells at opportunistic moments for their customers.

It's not even questionable. It is what it is that's the market. Same as when a pit trader or floor broker held a sell stop for 500 so futures on his pocket gtc. He was informed!!! He knew he had to sell a ton at that price ahead of time. That's an informational advantage or edge. It's not news information it is actual orders. It is how wall street works.
There are tons of research papers on retail noise traders just google it

I don't disagree with most of that.

I just think it's off topic. When floor pits were the norm the traders on the floor had an advantage over people who had to phone there orders in for obvious reasons.

Did that make them noise? They were playing different versions of the same game. Sure if they could take an advantage of situations but any advantage is quickly neutralized in the markets.

Sure now they have a huge database flow of novice traders but that doesn't change anything.

We will never move the market and they don't care about us.

And with all that information that doesn't guarantee they know the future any more than we do.

Also your comparing institutional traders to Robinhood traders?

Not exactly a fair comparison?

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  #22 (permalink)
Cutloss
Midway florida
 
 
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I'm not too sure you are really understanding noise traders retail you and me 99% of anyone on this forum and informed traders. There is a massive difference and it may sound strange to hear this but if you break time down into pico and nano seconds then believe it when I say the phone latency was much less than right now.

Electronically the games played with iceberg orders and fast cancels are beyond anything ever done in the pits. The informed trader is citadel who has customers buy orders and customers sell orders in their inbox every morning.

This means citadel uses that information and size to fill both sides of the mkt. They know the imbalance of supply n demand before it hits the mkt. Before they make the trades. Then they see the imbalances from the actual mkt because when you fill 60 to 60% of the orders you know which ones u filled n which ones u didnt. So you can see by eliminating the ones u did to get an idea of supply demand long short mkt moves by other participants. No easy feat. But it's what they do.

The entire mkt is about not letting you fill when it's your advantage. This is what many fail to realize. The walls of orders that put u in the back of the que. They mkt moves by cancels. When hft algos cancel your level they let u fill on it. They have priority weeks and months ahead of time with iceberg orders to the millions. Mo joke even 5000 es level has iceberg liquidity.

None of this means you wont or cant make money just understand it's a stacked against you deck and we retail typically cancel each other out. Noise means you have zero real information about companies or what large participants are doing for real with pre orders..retail must make educated or random guesses from charts which are history not pre trade. There is no way to change this..

Electronic trading in the es mini had 2000 to 3000 lots sometimes on 1 tick!! That's how deep it was. You could do 1000 lots for 1 tick slippage!! Now that would be a full point! A 50k cost in and out vs 12,500 back then. Cme needs trades for fees that's why!!

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  #23 (permalink)
 Sandpaddict 
Langley
 
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Cutloss View Post
I'm not too sure you are really understanding noise traders retail you and me 99% of anyone on this forum and informed traders. There is a massive difference and it may sound strange to hear this but if you break time down into pico and nano seconds then believe it when I say the phone latency was much less than right now.

Electronically the games played with iceberg orders and fast cancels are beyond anything ever done in the pits. The informed trader is citadel who has customers buy orders and customers sell orders in their inbox every morning.

This means citadel uses that information and size to fill both sides of the mkt. They know the imbalance of supply n demand before it hits the mkt. Before they make the trades. Then they see the imbalances from the actual mkt because when you fill 60 to 60% of the orders you know which ones u filled n which ones u didnt. So you can see by eliminating the ones u did to get an idea of supply demand long short mkt moves by other participants. No easy feat. But it's what they do.

The entire mkt is about not letting you fill when it's your advantage. This is what many fail to realize. The walls of orders that put u in the back of the que. They mkt moves by cancels. When hft algos cancel your level they let u fill on it. They have priority weeks and months ahead of time with iceberg orders to the millions. Mo joke even 5000 es level has iceberg liquidity.

None of this means you wont or cant make money just understand it's a stacked against you deck and we retail typically cancel each other out. Noise means you have zero real information about companies or what large participants are doing for real with pre orders..retail must make educated or random guesses from charts which are history not pre trade. There is no way to change this..

Electronic trading in the es mini had 2000 to 3000 lots sometimes on 1 tick!! That's how deep it was. You could do 1000 lots for 1 tick slippage!! Now that would be a full point! A 50k cost in and out vs 12,500 back then. Cme needs trades for fees that's why!!

My friend half the time I think we are arguing the same thing.

But again, that all maybe true... and I agree most is!... but that just makes it noise to US! Us retail traders.

Also again we are not playing the same game. I have ZERO issues getting filled EXACTLY where I want thanks to their liquidity.

They are noise to us. Sure. We dont know what they are doing and never will but that doesn't matter at all. The markets the market.

So I'm not really sure what exactly we are trying to define anymore?

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  #24 (permalink)
Cutloss
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Lol. No problems getting filled? Lol. Sure if you go market and pay up but try selling on the offer in the es futs and you will be waiting and waiting unless hft decides to cancel remaining orders n let u fill. No one would prefer 100 limits visible rather than 1000 visibke!!!

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  #25 (permalink)
 Sandpaddict 
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Cutloss View Post
Lol. No problems getting filled? Lol. Sure if you go market and pay up but try selling on the offer in the es futs and you will be waiting and waiting unless hft decides to cancel remaining orders n let u fill. No one would prefer 100 limits visible rather than 1000 visibke!!!

The market is an auction! That's how it functions! There ISN'T an institutional market maker eating everyones orders on either side of the bid/ask swallowing everyones positions!?!! It JUST DOESN'T WORK THAT WAY!!!

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  #26 (permalink)
Cutloss
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It's obvious from your last statement that you have never moved any size or even traded that much which is fine. Lots of people do well by not trading much.

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  #27 (permalink)
 SodyTexas 
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Sandpaddict View Post
Yes I agree noise is VERY measurable.

I would say though just because it has a trend up or down doesn't mean as much as measurements.

Standard Deviation, linear regression, and the least squares concept are better measurements of what we are measuring I think.

This paper...
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3243130

...although slightly off topic, but I dont think so, highlights the issues with standard measurements. Such as the sharpe ratio and it's cousin the SQN.

Again although not directly related to noise it's so profound you can see the glaring measuring errors within the existing tools.

Profitably and Quality Measurement.

PQM: See formula below. It's just beautiful! And far more accurate than anything before it as far as I'm concerned.Attachment 313102

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Reminds me or the pain ratio..
source: here

Sody

"The great Traders have always been humbled by the market early on in their careers creating a deep respect for the market. Until one has this respect indelibly engraved in their makeup, the concept of money management and discipline will never be treated seriously."
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  #28 (permalink)
 Sandpaddict 
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SodyTexas View Post
Reminds me or the pain ratio..
source: here

Sody

Oh wow. I've heard of that but never seen it writen.

Thank you.

Seems to have the same flaws as Sharpe? For sure the emphasis seem to be on the drawdown vs the Std Dev but it suffers the same flaws.

And for a double whammy... risk is directly correlated with reward and so with so much focus on what is the real rate of safe money + safe money + premium / return???

That paper explains how extreme cases can be assimilated into the equation AND how the results can be dramatically different, even desirable vs standard measurements.

To be honest if I had to choose I would still choose SQN over PtoG.

But that's me.

Cheers

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