Australian (ASX) Stock Market Forum

Market Makers and High Frequency Trading

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cogs said:
Not sure how anyone is supposed to trade successfully manually with these tools and corruption against you.
Click to expand...
Longer time horizons.
HFT, by definition, is working within very short information processing periods.
 
cogs said:
Not sure how anyone is supposed to trade successfully manually with these tools and corruption against you.
Click to expand...

Know thy enemy.
HFT presents opportunity. I have, at this stage, no problem with HFT participation in the Futures market. I read somewhere 29% of ES volume is HFT generated, with who knows how many orders not being transacted.
HFT in regards to straight out equities trading, to me, appears to be a problem with sub-pennying and HFT operations not adding to liquidity.

At the end of the day, at this present time, HFT participation in the marketplace exists. It is up to the individual trader to acknowledge and except this reality, and prosper.
 
Alpha_Bet said:
Know thy enemy.
HFT presents opportunity. I have, at this stage, no problem with HFT participation in the Futures market. I read somewhere 29% of ES volume is HFT generated, with who knows how many orders not being transacted.
HFT in regards to straight out equities trading, to me, appears to be a problem with sub-pennying and HFT operations not adding to liquidity.

At the end of the day, at this present time, HFT participation in the marketplace exists. It is up to the individual trader to acknowledge and except this reality, and prosper.
Click to expand...

;) ;)
 
Alpha_Bet said:
Know thy enemy.........

At the end of the day, at this present time, HFT participation in the marketplace exists. It is up to the individual trader to acknowledge and accept this reality, and prosper.
Click to expand...

How does a non HFT trader prosper from the existance of HFT traders in Equities?
 
nulla nulla said:
crown said:
Alpha_Bet said:
Know thy enemy.........

At the end of the day, at this present time, HFT participation in the marketplace exists. It is up to the individual trader to acknowledge and accept this reality, and prosper.
Click to expand...

How does a non HFT trader prosper from the existance of HFT traders in Equities?
Click to expand...
Click to expand...

Not an issue in my view.
Unless your trading in their time frame.
They will trade many times within yours.
From what Ive seen many HFT use very similar triggers and are predictable to a degree (in Indexes). The Algorithms seem to be of a similar type--Support/Resistance.

When you get massive volume at a bar youll see a correction in the other direction as they are getting in or out.
MOST newbies see this as support in a long (They are getting out) and resistance in a short (They are getting out).
Supportive volume/trend and Range analysis is necessary to complete the picture.

Just dont fight them
 
I still trade amongst it as it suits my style better, and as others have mentioned it becomes predicatable as I/we adapt so not a serious deterant.

Where I have noticed it most would be in approx the last 2 years or so, spike reversals, gap filling, market capping and picking bottoms have changed. I have noticed action becomes even more so 'flighty' and a little more challenging to get the timing right, when purely PC/Laptop based with broadband in a global sense. Watching volume and using VSA it appears even the serious money gets played out of their own set ups at times on these reversals, it could simply be 'old school' pit traders being squeezed out also with HFT.;)

That's life. Adapt and improvise.
 
I don’t look at it as in any way evil … I don’t think the guy who’s trying to hide the supply-demand imbalance [by using an execution algorithm] is any better a human being than the person trying to discover the true supply-demand. I don’t know why … someone who runs an algo-sniffing strategy is bad … he’s trying to discover the guy who has a million shares [to sell] and the price then should readjust to the fact that there’s a million shares to buy.
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http://www.lrb.co.uk/2011/05/19/donald-mackenzie/how-to-make-money-in-microseconds

compare to Richard wyckoff ( He first said this in 1908 )

The small buying and selling waves which occur during every stock market
session run so many minutes They are caused largely
by the restlessness of active professional traders, much like the ripples
produced by the wind upon the ocean.

Traders must have activity; they make their livelihood by trading on fluctuations. Therefore, they engage in a ceaseless tug of war, trying to put prices up whenever the condition of the market is favorable, or drive them down when they find that the bulls are weak or have overextended
themselves. The degree of success or failure attending their efforts enables us
determine whether the market is growing stronger or weaker.
Click to expand...

Same ?

weakness or strength is uncovered
demand and supply become unbalanced


And the fact that markets are made up of different Time Horizons
All trading with each other is what is important.

There is still the same market behavior .

Motorway
 
nulla nulla said:
How does a non HFT trader prosper from the existance of HFT traders in Equities?
Click to expand...

I can't comment with authority on Equities trading as I trade only Futures.
With that said, I suggest screen time and Intraday swing trading for equities. There are still guys trading prop in the US that have worked out HFT operations and are discretionary trading US stocks for couple cents. Price will still go where price wants to go despite front running, sub-pennying, quote stuffing etc.

HFT with regards to Futures trading has had little effect on the Futures landscape as far as I'm concerned. I still scalp ES with my 365 millisecond ping to Chicago with no problems. Support/Resistance, accumulation, distribution etc are still valid.
 
"And the fact that markets are made up of different Time Horizons
All trading with each other is what is important".
Motorway



Fractals :)
 
Trade parasites feeding at the heart of the ASX

April 11, 2012


In the Australian Securities Exchange's Sydney data room, which is about the size of a big lounge room, there are six "cuckoos". These are the banks of servers installed by high-frequency traders.

They sit against the wall opposite the ASX servers and each is connected directly into the host by a fat fibre optic pipe. Each cable is precisely the same length by agreement with the ASX so that none gets an advantage; if one server is closer to the input, its cable is looped around to lengthen it.

Think about that: one less metre of optic fibre carrying data at 299.8 million metres per second - that is, the speed of light - would give one share trader an unfair advantage over the rest. It suggests that something pretty quick is going on.

The question is whether it's fair to the rest of us; whether those six parasites with their suckers fastened directly into the heart of the ASX should be allowed to get away with it.

The ASX is no longer a regulator, just a business, so it says that if the practice is legal and it pays a fee – not to mention a handy rent in the data room – then it can't and won't stop them.

For global regulators, it's actually too late: high-frequency trading accounts for as much as 70 per cent of the volume on American stock exchanges, including the NYSE; the time to control it was 10 years ago.

What do the computers and their algorithms do? Well, as my relatively low-frequency brain can understand it, these machines constantly monitor order flow into the ASX servers, and the sophisticated programs can pick up patterns that indicate when a reasonably large order has been placed. What they then do, in effect, is "front-run" – that is, they buy ahead of the order and make a small spread selling into it.

In other words, by operating at the speed of light they can "feel" a buy order coming and can dart in front of them and ensure that the buyers pay a little bit more than they were going to, without noticing a thing.

These operators begin each day owning no shares and end each day in the same position, but they make a lot of money by doing thousands of trades every day: it's a high-volume, low-margin business.

It's not known how much money the HFT traders make, but whatever it is, they weren't making it 10-15 years ago, and stock market returns have not gone up in that time, so whatever they make has come out of someone else's pocket.

That someone, of course, is you. The buy orders that the HFT operators are front running come from the superannuation funds in which ordinary people have their money. Now when they place an order, they usually end up paying a cent more than they would have because they are buying from someone who didn't own any of the shares 10 microseconds ago and only bought them to make that quick cent.

HFT represents less than 10 per cent of the volume of the ASX, but in the United States it is much more, and there is no reason to think we won't follow the US.

Should something be done to stop it? I think so, but it's too late.

HFT firms like the privately owned and aptly named Getco (Global Electronic Trading Company), the world's largest HFT operator, produce a large amount of self-justifying research material based around the proposition that they help investors by providing extra liquidity in the market.

This, plus presumably the hiring of expensive lobbyists, has snowed legislators and regulators and let the practice flourish, to the point where the parasites are taking over the host and it's too late to stop them.

Stock exchanges the world over are now making a fortune from renting space in their data rooms to high-frequency computerised traders and would probably collapse without it (the ASX would not – yet.)

As a result, investors are abandoning the "lit" markets and using "dark pools" instead. This simply refers to off-market share trading away from the official stock exchanges provided by investment banks where big investors know they are not being picked off by high-frequency front runners. The problem with that is that these "dark pools" are not properly regulated or transparent.

The joke is that in many cases, the same investment banks are doing both the high-frequency trading and running the dark pools; they are causing the problem and solving it, each for a handsome profit.

http://www.abc.net.au/news/2012-04-11/kohler-high-frequency-trade-parasites-at-heart-of-asx/3943052


Causing the problem and solving it. I've seen that before in the world of PC viruses and anti-virus software.
 
GB Alan Kohler is a muppet.

There would be no market in most products if those servers where not there. I'm again surprised at how little you know of market structure after all this time that you would be sucked into such an ordinary piece of drivel.
 
Trembling Hand said:
Do you know what those servers do?
Click to expand...

lol. It's written in the article what they do. They monitor order flow and front run big orders.

It's not a problem for any of us retail traders. But these guys are getting a free lunch, no risk. That's the definition of a parasite in my book.
 
Gringotts Bank said:
lol. It's written in the article what they do. They monitor order flow and front run big orders.

It's not a problem for any of us retail traders. But these guys are getting a free lunch, no risk. That's the definition of a parasite in my book.
Click to expand...

So you believe what muppets write as gospel? No ability to critically think for yourself?
 

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