Alan Kohler's Take on High Frequency Trading

[Starcraftmazter]

Impossible if its a market order. Because no-one knows you're putting in a market order but you, and after you place it the broker routes it in, and then it hits market. Then and only then can the HFT react.

Understand these three very specific events which occur in the following order:

1. You hit the button on your computer to send the order.
2. HFT bot executes it's trading and changes sp.
3. Your order is received by the ASX and executed.

Because this seems hard to understand let me emphasise that point (2) would occur regardless of whether you wanted to execute your order or not - you are unluckily and through no particular fault of your own involved in HFT manipulation of the market.

I am not saying every single order every single person makes will be affected, but a lot will. That is the point.

Really? HFTs trading breakouts on penny stocks too?

I'm pretty sure penny stocks are not the only stocks on the ASX which have over $0 turnover.

On a intra timeframe? And how would pattern work with something that is supposed to take a few million trades a day? I don't think there are that many setups on any pattern.
Unless you mean something else by pattern.

Not sure what exactly you mean, but by pattern I mean any sort of behaviour which is occurring in any stock which is picked up by the hft algo as indicating something which is well known to happen immediately following that pattern. They then trade on it.

 

[skyQuake]

Understand these three very specific events which occur in the following order:

1. You hit the button on your computer to send the order.
2. HFT bot executes it's trading and changes sp.
3. Your order is received by the ASX and executed.

Because this seems hard to understand let me emphasise that point (2) would occur regardless of whether you wanted to execute your order or not - you are unluckily and through no particular fault of your own involved in HFT manipulation of the market.

Well that my point. 50% of the time the the price manipulation is in your favor, and 50% its not. Because its completely random its going to average 50% in the end.

I am not saying every single order every single person makes will be affected, but a lot will. That is the point.

I'm pretty sure penny stocks are not the only stocks on the ASX which have over $0 turnover.

Not sure what exactly you mean, but by pattern I mean any sort of behaviour which is occurring in any stock which is picked up by the hft algo as indicating something which is well known to happen immediately following that pattern. They then trade on it.

What i meant is pattern trading isnt high frequency. Its low frequency if anything. There simply isnt that many setups.

Price action pattern on a 5min chart acts out over the nxt 20min. Patterns over the daily act out over the next few days or week. Do you really need 300micro second latency to act on that?
Or a volume participation algo? Issue would be volume not speed.

 

[Starcraftmazter]

Well that my point. 50% of the time the the price manipulation is in your favor, and 50% its not. Because its completely random its going to average 50% in the end.

I dispute this because it is baseless.

Let's say you're a trader and HFTers make money by exploiting your behaviour. They know how you will react to things so they react to them quicker and take advantage of you.

Then it would not be 50%.

What i meant is pattern trading isnt high frequency. Its low frequency if anything. There simply isnt that many setups.

There are many patterns which occur over different time scales.

 

[skyQuake]

I dispute this because it is baseless.

Let's say you're a trader and HFTers make money by exploiting your behaviour. They know how you will react to things so they react to them quicker and take advantage of you.

Then it would not be 50%.

Ok, so you're saying the HFT uses pattern recognition to take trades before other market participants do.

HFTs do not act this way. It defeats the purpose of having the fastest trigger finger.

An example of what they DO is index arb. And that requires speed. Tiny arb opportunities pop up all the time, and are relatively unexpected compared to say a breakout on BHP which people have been anticipating for weeks. Will the arb disappear 1sec later? Yes. Will another one pop up in 1sec? Probably.
Can you buy a BHP breakout 30sec after the pop? Yes. 5mins? Yes. Will another one occur in 24hrs? Very unlikely.

The problem with stocks is volume. Perhaps if you've traded size you'll know that time is not important, or even price (to an extent). Volume is all that matters. Being first might get u best price, but for no real volume.

 

[Starcraftmazter]

Ok, so you're saying the HFT uses pattern recognition to take trades before other market participants do.

HFTs do not act this way. It defeats the purpose of having the fastest trigger finger.

An example of what they DO is index arb. And that requires speed. Tiny arb opportunities pop up all the time, and are relatively unexpected compared to say a breakout on BHP which people have been anticipating for weeks. Will the arb disappear 1sec later? Yes. Will another one pop up in 1sec? Probably.
Can you buy a BHP breakout 30sec after the pop? Yes. 5mins? Yes. Will another one occur in 24hrs? Very unlikely.

The problem with stocks is volume. Perhaps if you've traded size you'll know that time is not important, or even price (to an extent). Volume is all that matters. Being first might get u best price, but for no real volume.

So is your claim that the only thing HFTers do is arbitrage?

I understand your point about volume, but if the HFTers can detect a certain price action which is about to occur in a stock like BHP which is pretty damn liquid - and it need not at all be a significant action like a breakout, they could simply smash into the orders already on market because they know the sp is about to fly further in that direction anyway.

 

[skyQuake]

So is your claim that the only thing HFTers do is arbitrage?

Thats pretty much it. They're very delta neutral.

I understand your point about volume, but if the HFTers can detect a certain price action which is about to occur in a stock like BHP which is pretty damn liquid - and it need not at all be a significant action like a breakout, they could simply smash into the orders already on market because they know the sp is about to fly further in that direction anyway.

Order in the market depth are seldom fulfilling. Real volume doesnt sit at market, so hfts would have touble getting filled at good prices.
How often do u see spikes in stocks that don't fade? (excluding news, big levels etc)
You're far far more likely to see modest but continuous green/red candles continue than spikes with no follow thru.

 

[Trembling Hand]

Thats pretty much it. They're very delta neutral.

skyQuake ever get the feeling you're talking to someone who learnt everything from wiki and from articles like Kohlers and is yet to actually put together anything that looks like a system? He has no idea what they do. Thats why he thinks they are some all winning all robbing super algo. And has no idea why they need a deep active derivative market.

or even more likely never traded a thing profitably in his life??

 

[skyQuake]

Too often. Still, I'd like to believe there's hope.

Even wiki had a line about how HFTs compete with each other not investors. Better show that to Kohler.

 

[cynic]

Too often. Still, I'd like to believe there's hope.

Even wiki had a line about how HFTs compete with each other not investors. Better show that to Kohler.

Congratulations SQ and TH! I never thought I'd live to see it! Miracles do happen!

You've achieved the impossible and conquered the unconquerable by somehow managing to have the last word!

So tell me - which of you was it who hatched that clever scheme to insert the entry into wiki?

 

[moXJO]

or even more likely never traded a thing profitably in his life??

SCM have you ever traded shares(ops,futs) or bought property?
You seem to be an expert in both

 

[tech/a]

SCM have you ever traded shares(ops,futs) or bought property?
You seem to be an expert in both

Why bother?

 

[sinner]

I am not sure which one is House - TH, SCM, or Hugh Laurie?

Check SCMs contributions to other threads for a clue. For the last 30 odd days he has been trawling threads and arguing with anyone and everyone about everything.

You should've seen the three pages of 'discussion' where we were all 'educated' as to how Apple paying a dividend would apparently distort the whole market. To the point where he was reprimanded by a mod.

 

[Trembling Hand]

SCM I just tried to send through to you the historical tick data but its bounced.

"The email account that you tried to reach does not exist."

I hope you have a go at it. Would love to see your system design skills at work

 

[CanOz]

Check SCMs contributions to other threads for a clue. For the last 30 odd days he has been trawling threads and arguing with anyone and everyone about everything.

You should've seen the three pages of 'discussion' where we were all 'educated' as to how Apple paying a dividend would apparently distort the whole market. To the point where he was reprimanded by a mod.

LOL, I noticed the same thing and was almost tempted to weigh in on an argument....thankfully my forum experience has left me with some decent lessons...

Its almost as if SCM is trying to prove his worth or intelligence to someone...I sense a deeper Physiological issue at heart.

Cheers,


CanOz

 

[CanOz]

Why bother?


View attachment 46743

LOL @ Tech/A

Ahh the wonders of technology.

CanOz

 

[Starcraftmazter]

SCM I just tried to send through to you the historical tick data but its bounced.

"The email account that you tried to reach does not exist."

I hope you have a go at it. Would love to see your system design skills at work

I've received nothing so far. My email is the same as my forum username @gmail.com, check again.

Its almost as if SCM is trying to prove his worth or intelligence to someone...I sense a deeper Physiological issue at heart.

No, I just can't stand the stupidity that I see other people exhibit on this forum. It is almost as though they are from a parallel universe.

 

[Trembling Hand]

I've received nothing so far. My email is the same as my forum username @gmail.com, check again.

The email you gave was wrong

No, I just can't stand the stupidity that I see other people exhibit on this forum. It is almost as though they are from a parallel universe.

You mean like stupidity of pretending you know what trading is about when you don't trade yourself?

Or the stupidity of commenting on bots robbing retail when you don't know that they even use derivatives etc

 

[skc]

The email you gave was wrong

View attachment 46746


You mean like stupidity of pretending you know what trading is about when you don't trade yourself?

Or the stupidity of commenting on bots robbing retail when you don't know that they even use derivatives etc

Missing the t in mazter

But TH...

You can't convince someone who define "unfairness" as any venture that requires above-average capital and makes a profit. And you know you won't get your many wasted hours back...as well as the bandwidth you wasted in sending him the data.

Personally I have a 15-post stop loss on forum debate (I only use this term very losely) with fools (I also use this term very losely).

 

[Starcraftmazter]

Or the stupidity of commenting on bots robbing retail when you don't know that they even use derivatives etc

How is it stupid, it's common sense. They close their positions at the end of a day. That means they do not make money from value created overtime by companies. That implies that for every $1 they make - someone really true has to lose $1.

Prove me wrong.

 

[Trembling Hand]

Skc

Yep got the email off eventually but that was the original one he gave.

But I really am waiting with great anticipation for the results of the next bot to rob retail of their hard earned.

And yep I've well and truly blown my stop!!