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How to identify the Wall street algos kicking in and out
I'm interested in learning if and how people trade successfully around the the Wall street algos. I recently heard how one trade room trade stated that.
Can you help answer these questions from other members on NexusFi?
I can give my 2 cents, others are free to dispute my view and their opinions are just as valid.
The vast majority of institutional trading is executed by computers, thus the market you see on the chart in front of you (or dom if you trade order flow, etc) at any particular moment was formed by algorithms written for different strategies by different teams and which come together to form a kind of aggregate auction.
I believe the best way to trade is not "around" them per se, but to figure out who is in control, buyers or sellers, and try to position your trades along with the side that is in control at any particular time.
Of course this is not simple, and here is where you get into countless arguments about which strategies, indicators, books, etc. are the best. The answer to that question I believe is any system that fits your personal style and philosophy about the market, and that you understand (or at least want to learn) and that you enjoy.
If nothing else, you are probably setting yourself up for a lot of aggro. I mean, don't overthink the whole thing. it will drive you nuts. Market is either going up or down.
FWIW, I have found the futures markets too manipulated to be traded anyway. (I know a lot of people will argue w/ this, but what I mean is all of this high frequency nonsense about sitting a computer 30 inches form the trading to get a 1/100000000 micro-micro second of advantage.) I can make money month after month in FX, can't do it in futures. Its just too small of a market as the nonsense causes chaos.
And then there is the Twitter God, our President.
I think in the end it comes down to liquidity. FX has more than futures will ever be able to dream about. I think that's why I have found it easier.
Just my 2 cents. Don't complicate things. Trade with the trend. Have huge and deep pockets if you want to trade futures. Otherwise, its a fool's errand.
Well you're asking several different questions in that one post and I'd like to answer the first one.
How do you identify the wall street algos kicking in and out -> pick up a small timeframe chart like 50 TICK chart or if you're trading ES/NQ/CL you could even have a bigger timeframed chart and see the same thing..
I could show you a video of how it looks next time I see it happen but what you'll see is LOTS of sideways trading going on really fast.
How do you tell if algorithmic traders are trading at some particular time? Open any chart of any instrument at any time. Algos are trading all the time, right now.
How do you get around them and win? You don't get around them. They will often be taking the other side of whatever trade you take. Not necessarily, but they are in there adding to the liquidity (trading activity.)
"I recently heard how one trade room stated that." Trade rooms and other sources of trading advice will state anything.
This is kind of a cynical reply, and I'm sorry. But people do really like to use the idea that some powerful group of insiders are rigging the market against innocent traders like themselves. Other people are very happy to explain how the innocent traders can protect themselves. Usually there is some kind of money that needs to be paid for this valuable and totally reliable, innocent information.
Now, can you see large and probably algorithmic activity while watching order flow? I don't use order flow type trading, but I know many people do, and are successful with it. That's not what I'm talking about. I'm talking about the supposed danger of the algos and about some kind of special knowledge that someone will provide you to avoid them.
It is a good idea to ignore this sort of thing, and learn how to trade. There are lots of ways that work.
If you want to look into order flow, there is information here on futures.io and online that can get you started, on your own. Or try something else. You don't need special protection from the algos.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
