Scalping

[DionysusToast]

There definitely does seem to be a campaign against them though. Fund managers especially seem to hate them, it's said that they consume liquidity and create higher volatility. On occasion this may be true about liquidity, although for the majority of the time I would have thought the opposite..

Depends on the particular strategy.

Anyone trading Citigroup a couple of years ago would have a very different view of HFTs as consumers of liquidity.

High volume, high liquidity and miniscule volatility.

C ended up splitting to throw the HFTs off it's back.

There's no single HFT strategy, we shouldn't really talk about them in general terms. HFT rebate trading is one style that can totally stifle volatility with a massive influx of liquidity.

What was C doing at the time? 300 million shares a day and a 5c range?

That was certainly a negative thing for Citigroup and it's ability to raise further funds that depended on share prices.

 

[MoonRocket]

I would've thought that anyone with a longer term out look even slightly and fundamentals would have overwhelmed HFTs.
But no?

 

[Liquid validity]

I would've thought that anyone with a longer term out look even slightly and fundamentals would have overwhelmed HFTs.
But no?

True to an extent.
Stops are still more likely to be hit due to the volatility created.
Or you widen stops, either increasing risk (dumb) or reducing potential reward.

 

[The Leopard]

I'd say for retailers other than scalpers, its the higher volatility that is the greatest effect.

Would you view this as positive or negative though? For some "traditional" approaches like breakouts, fading breakouts, and simple with-trend pullback entries, I'd say whatever influence they have is largely positive.

Volatility is good, as is predictability. I certainly seem to see lots of strong, smooth moves, pretty much to-the-tick tests of obvious entry points etc.

I don't really know, of course, I'm just speculating based on what I've observed. That obviously carries a lot of problems. Scalpers I can certainly imagine having problems, but intraday traders trading longer than that I think will benefit.

Longer than intraday I wouldn't have thought HFT has much influence?

 

[The Leopard]

Depends on the particular strategy.

Anyone trading Citigroup a couple of years ago would have a very different view of HFTs as consumers of liquidity.

High volume, high liquidity and miniscule volatility.

C ended up splitting to throw the HFTs off it's back.

There's no single HFT strategy, we shouldn't really talk about them in general terms. HFT rebate trading is one style that can totally stifle volatility with a massive influx of liquidity.

What was C doing at the time? 300 million shares a day and a 5c range?

That was certainly a negative thing for Citigroup and it's ability to raise further funds that depended on share prices.

That's very true. From what I gather there are strategies based on everything that I could imagine, and quite a few on things that I can't.

I've never been involved much at the micro level, so perhaps the effect has made a big change there, I don't know.

 

[Mike Kshemaraja]

That's very true. From what I gather there are strategies based on everything that I could imagine, and quite a few on things that I can't.

I've never been involved much at the micro level, so perhaps the effect has made a big change there, I don't know.

Leopold

How do you trade, meaning timeframe,instrument and so on, if you do not mind explaining.

 

[Liquid validity]

Would you view this as positive or negative though? For some "traditional" approaches like breakouts, fading breakouts, and simple with-trend pullback entries, I'd say whatever influence they have is largely positive.

Volatility is good, as is predictability. I certainly seem to see lots of strong, smooth moves, pretty much to-the-tick tests of obvious entry points etc.

I don't really know, of course, I'm just speculating based on what I've observed. That obviously carries a lot of problems. Scalpers I can certainly imagine having problems, but intraday traders trading longer than that I think will benefit.

Longer than intraday I wouldn't have thought HFT has much influence?

Yeah I agree with the sentiments.
No point b1tching about changing market conditions.
Find a way to use those conditions to your advantage.

As for longer than intraday, on the face of it you would think so.
Seems to be a lot of fund managers, pensions funds and insti algo traders
that don't like HFT.

Extract from a PDF I posted earlier in the thread - pg 3 question 1:
http://www.themistrading.com/articl..._--_Latency_Arbitrage_--_December_4__2009.pdf

The primary response from HFTs or market centers is typically “a penny or two should not matter to long
term investors; this is much ado about nothing,” to paraphrase the CEO of a major ATS who was addressing
a financial industry conference in New York City in early November. We disagree completely. It isn’t $0.01-
$0.02. It’s $1.5-$3 billion.

Who are they taking that 1.5-3B from...

 

[The Leopard]

Leopold

How do you trade, meaning timeframe,instrument and so on, if you do not mind explaining.

5 minute chart, CME/CBOT futures mostly, equity indices above all.

I suppose I would call it price action, although probably not what most people would mean by price action.

I tend to try to reduce risk until I'm near the break even level, then hold for as long as possible intraday. This results in a lot of scratch trades, a lot of small wins and small losses, and a smallish number of big wins that make up most of the profit. Strike rate I don't know because I don't pay much attention to it, but excluding scratch trades it's probably 60% or so at a guess.

 

[Mike Kshemaraja]

5 minute chart, CME/CBOT futures mostly, equity indices above all.

I suppose I would call it price action, although probably not what most people would mean by price action.

I tend to try to reduce risk until I'm near the break even level, then hold for as long as possible intraday. This results in a lot of scratch trades, a lot of small wins and small losses, and a smallish number of big wins that make up most of the profit. Strike rate I don't know because I don't pay much attention to it, but excluding scratch trades it's probably 60% or so at a guess.

Clear like crispy running water. Thank you.

You should post some of your trades on my thread if you like:

http://www.trade2win.com/boards/day-trading-scalping/146302-price-action-scalping.html

 

[The Leopard]

Clear like crispy running water. Thank you.

You should post some of your trades on my thread if you like:

http://www.trade2win.com/boards/day-trading-scalping/146302-price-action-scalping.html

My approach is to try to use the overall price action to interpret the market (or however you want to call it). It's not based on "set ups" as such, which is I think a major reason why people don't make it with this approach. If people are looking for a simple pattern / candle = trade I think they're likely to be disappointed.

Patterns and set ups and even individual bars (such as the dreaded pin bar) have their place I think, but I view them more as a starting point for beginning to think about how the market works rather than a major part of a "method". For example, I came to the conclusion long ago that if I was going to blindly take standard set ups and patterns I'd be better off fading them. This is especially the case with reversal patterns, for example, which fail for the most part. That's not to say they can't be used profitably (although I make a conscious effort to avoid reversal trades) just that if one wants to do so one has to be able to interpret the market context. That takes a lot of experience and the right mindset to be able to do in real time.

Sorry this is a bit rambling, it just got me thinking.

 

[Mike Kshemaraja]

My approach is to try to use the overall price action to interpret the market (or however you want to call it). It's not based on "set ups" as such, which is I think a major reason why people don't make it with this approach. If people are looking for a simple pattern / candle = trade I think they're likely to be disappointed.

Patterns and set ups and even individual bars (such as the dreaded pin bar) have their place I think, but I view them more as a starting point for beginning to think about how the market works rather than a major part of a "method". For example, I came to the conclusion long ago that if I was going to blindly take standard set ups and patterns I'd be better off fading them. This is especially the case with reversal patterns, for example, which fail for the most part. That's not to say they can't be used profitably (although I make a conscious effort to avoid reversal trades) just that if one wants to do so one has to be able to interpret the market context. That takes a lot of experience and the right mindset to be able to do in real time.

Sorry this is a bit rambling, it just got me thinking.

I agree with you 100%.

My trades also are not based on set ups but on the underlying strength of the market noticeable in price action (higher bottoms, lower tops, horizontal breakouts, round number fight. Is the market trending, running in resistance, testing support? and so on).

Set ups are use only to enter trades in most cases when the above is taken in consideration.

Set ups to go short if the pressure is up are not considered at all.

 

[VielGeld]

So HFT is good to intra-day traders?

Good news to me! I'm a guy who uses a scalper's entry to refine a trade, but the moves I catch rarely last more than 30m.

And if HFT increase volatility and momentum, they can pile in as much as they want. :smart:

 

[DionysusToast]

VG - HFT is many different things.

It's a bit like the term "Day Trading" - that can mean many different things.

So - is it good or bad? Depends on the type of strategy employed...

 

[The Leopard]

VG - HFT is many different things.

It's a bit like the term "Day Trading" - that can mean many different things.

So - is it good or bad? Depends on the type of strategy employed...

 

[SM_1]

Interesting thread/discussion here.

The whole HFT thing is fascinating, but they are all made/programmed by humans yes? So there will still be patterns/tradeable ideas from them, opportunities in the algos etc?(over-extension with sell/buy programs triggering more sell/buy programs?) And, after all, us order flow traders who watch for size etc. coming into the market, isn't that size still going to be there, even with HFT, if you want to get long or short 5000 contracts, you still have to send through 5000 lots, whether its spamming it with 1 lots, or whatever, its still going to happen, therefore we should still be able to see it. It's purely the speed factor that effects PURE scalpers(inside spread) but other than that(which I don't know of many depth traders that actually do that, it's usually a few ticks) we will still see everything that prints through, we have to, and if size/biggest wallet is the king that moves markets, then we still have opportunities?

I often think that no matter what, I can see every order that goes through the market via DOM, so we shouldn't really miss anything, just have to adapt to however they are doing it. It will indeed be very interesting to see what happens with HFT in the future, I can't imagine what it would be like to actually have all human traders in the market, it would be fantastic(for reading depth)............but very hard to imagine that happening. I think the computers are definitely here to stay, the exchanges simply make too much money from them to bother changing anything.(which is fair enough I guess, not going to get rid of the best customers who do the most transactions are you?)

 

[VielGeld]

VG - HFT is many different things.

It's a bit like the term "Day Trading" - that can mean many different things.

So - is it good or bad? Depends on the type of strategy employed...

So long as it doesn't crimp my style, I'm cool with it, lol.

I think that's my greatest fear atm -- that after putting in all this time and energy, the market suddenly dies out because there's no more volatility. That would be... Not good. Not good at all.

 

[Mike Kshemaraja]

The ability of a decent trader is to adapt to different environments.

The market is a living creature, mutes and changes all the time.

That is why screen time is an edge per se, once the dance becomes like a second skin within his multiples facet, the trader will be able to take out of it as much as he can in accordance of his own ability taken in consideration issues like money management and psychology.

 

[MoonRocket]

So long as it doesn't crimp my style, I'm cool with it, lol.

I think that's my greatest fear atm -- that after putting in all this time and energy, the market suddenly dies out because there's no more volatility. That would be... Not good. Not good at all.

The market will change but given the effort and your age you won't have any trouble
adapting. Most traders evolve over the years

 

[DionysusToast]

So long as it doesn't crimp my style, I'm cool with it, lol.

I think that's my greatest fear atm -- that after putting in all this time and energy, the market suddenly dies out because there's no more volatility. That would be... Not good. Not good at all.

I had a look at the volume on stocks yesterday.

It used to be that C was getting seriously hit by HFTs. They moved away when C did a reverse split.

Looking at the markets, it seems that BAC is volume leader:

680 million shares traded and a 50c range. One of those 5 min bars had 17M traded and a 12c range. It's certainly not the same as C was a few years ago but this looks like algo rebate trading to me. It's not mean revision and it's certainly not directional. If I'm paying for these monkeys to get rebates on those trades, I'm not happy...

The other nefarious practice is front running. This was in the news a few years ago. If this does go on (I have no evidence either way), then it is effectively a tax on the large trades that funds place. That's skimming pennies off pension funds. Latency arbitrage is a sort of front running in my opinion.

On the other hand, predatory algos looking for the footprints of large buyers splitting their orders - I think that's fair game. That's a level playing field whilst front running based on a speed advantage is pretty much outright cheating.

 

[ChocolateDigestive]

I had a look at the volume on stocks yesterday.

It used to be that C was getting seriously hit by HFTs. They moved away when C did a reverse split.

Looking at the markets, it seems that BAC is volume leader:

680 million shares traded and a 50c range. One of those 5 min bars had 17M traded and a 12c range. It's certainly not the same as C was a few years ago but this looks like algo rebate trading to me. It's not mean revision and it's certainly not directional. If I'm paying for these monkeys to get rebates on those trades, I'm not happy...

The other nefarious practice is front running. This was in the news a few years ago. If this does go on (I have no evidence either way), then it is effectively a tax on the large trades that funds place. That's skimming pennies off pension funds. Latency arbitrage is a sort of front running in my opinion.

On the other hand, predatory algos looking for the footprints of large buyers splitting their orders - I think that's fair game. That's a level playing field whilst front running based on a speed advantage is pretty much outright cheating.

a lot of the volume going through the large retail brokerages is offered up for internalization and goes through the tape as market swaps. if you are truly scalping stocks it would be wise to use limit orders and get paid to provide the liquidity. Say you route through Sigma X (http://gset.gs.com/offering/execution.asp) you receive $0.005 if you are hit on your limit order and you pay $0.002 if you place a market order. depends on your strategy. if you are looking for quick momentum plays you could come in with a market order as the price is leaving then try and exit on a limit, that way you should be up on the rebates if you route it correctly.