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Do It Yourself High Frequency Trading
As the only way to make money in this market is to mimic the big boys and to churn stock after stock (especially those with massive short interests) then closing 100% in cash at the end of every day, it was only a matter of time before someone started pitching the very same product that Comedy Central's Cash Cow highlighted is a sure way to make gobs of free money, to retail investors. That this someone happened to be Lime Brokerage is probably not very surprising.
The presentation below is not only a good primer into the inner tinkerings of traditional HFT systems (and should answer some latent questions on why Zero Hedge is so amused by VWAP on a recurring basis) but also how, for the low, low monthly payment of $19.95 (or a ballpark figure) you too can join in this bonanza of free, free, guaranteed money.
With such pearls as :
Static Data Processing: "When was the price of BAC below its trailing 5 minute VWAP yesterday?"
and
"Complex" Event Processing: "What equities are below their trailing 5 minute VWAP right now and where can i find liquidity"
we hope this presentation will answer many questions about the ongoing ridicule of just how investment decisions are being made in the current market, and the fact that 19 year old mathematicians who have never heard of such things as revenue, gross margin, or EBITDA (not that these matter when the Fed has blessed the stock bubble), now dominate marginal purchasing power.
And if the presentation itself is not enough for you to run out and buy a couple of i7's, cluster them up and start watching the money trickle in, here is a link to an actual clip which someone decided was worth the time to actually put together in the pursuit of that last marginal idiot.
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"You're gonna make an assload of money!"
As Benjamin Graham reminds us,"Wall Street people learn nothing and forget everything."
The squid is in for their cut:
Link
Front-running? Naked short selling?
FREE SERGEY
There was a story on Bloomberg TV this morning about the increasing numbers of individuals who are trading foreign currency. They estimated that individuals make up about 10% of FX trading volume now. A company that offers forex trading for individuals (don't recall its name) is planning to go public in the next few months.
Don't know if they're still doing it, but FX trading was big with Japanese housewives a couple of years or so ago.
like Japanese housewives. but they do it for shits and giggle in between ironing and cleaning up the children puke from the floor.
http://ftalphaville.ft.com/2009/10/05/75466/forex-marketing-goes-mainstream/
Thanks for the link. I went to a couple of links from there. I was thinking that Mrs. Wantanabe's standard bet had been for the dollar strengthening against the yen back when the exchange ratio was in the 110-120 range. Sadly, most of the Mrs. Wantanabes likely got wiped out. Perhaps Mrs. Robo-Jones will replace them.
http://www.gocurrency.com/forex-news/2007/08/15/who-is-mrs-watanabe/
““Mrs. Watanabe” is the designation used to describe the typical Japanese woman, and she is killing the professional forex market right now. Currency analysts at places like Deutsche Bank and Goldman Sachs predicted USD/JPY to end this year around 115, or even lower. But until the catastrophic events of this past week or so, the yen has not been able to do much better 120/dollar. And much of the reason for that is Mrs. Watanabe.”
“In July, Bank of Japan board member Kiyohiko Nishimura made a speech praising these Japanese housewives for steadying the forex market. Historically, the carry trade has always ended disastrously (although it has always rebounded from that crash) with investors across the board rushing to get out of the trade all at once. Mrs. Watanabe does not act that way, however. Every dip in USD/JPY is a buying opportunity, and as such, she reduces currency swings. It looks like the carry trade is near its end. But it was a good ride while it lasted, thanks to Mrs. Watanabe. A gnome of Zurich, she is not.”
http://ftalphaville.ft.com/blog/2009/09/30/74721/mrs-robo-jones-starts-t...
“We’ve written about the shifting dynamics in the world of retail forex trading before. In particular, the phasing out of ‘Mrs. Watanabe‘ in favour of ‘Mrs. Robo Jones’ — the western-based punter seeking returns in a zero-rate environment, but doing so with the help of algorithmic tools and so-called FX bots.
These FX bots, peddled on the internet or by the FX platforms themselves, make hugely tempting profitability claims. More often than not though — by guaranteeing relatively predictable trading volumes — they’re only a sure income stream for their creators or the FX platforms they are used on.”
this makes me sick, i think i just threw up in my mouth ....
Too bad Billy Mays isn't here to pitch this around the clock on cable.
Especially for Mrs Mays...
RIP
perhaps that vacuum can be filled by turbo boy after he is replaced by jdimon.
[Using my best Billy Mays voice]
"Built for speed. Built to trade. Your guaranteed profit is already made...
"Do you want to be rich? Are you short on time? Don't quit your job, bitch. HFT earns your money, dime-by-dime...
"Tired of shopping at second hand clothing racks? You'll be making more money than Goldman Sachs."
HI BILLY MAYS HERE FOR HIGH FREQUENCY TRADING! DO YOU WANT TO PICK UP PENNIES IN FRONT OF A STEAMROLLER LIKE THE BIG BOYS AT LONG TERM CAPITAL, BUT IN SUBMILLISECOND TIME? DO YOU PREFER TO SPEND YOUR DAY STARING AT PORN INSTEAD OF CONDUCTING YOUR OWN, SLOW, THOUGHTFUL ANALYSIS OF FUNDAMENTALS? DO YOU WISH YOU HAD LOST SOME SKIN IN THE 1987 AUTOMATED TRADING CRASH SO YOU COULD TELL THE OLD GUYS AT YOUR FIRM THAT YOU'VE BEEN THERE DONE THAT. WELL, I'VE GOT THE SOLUTION: INTRODUCING "HFT-IT-YOURSELF" ...
DO YOU PREFER TO SPEND YOUR DAY STARING AT PORN INSTEAD OF CONDUCTING YOUR OWN, SLOW, THOUGHTFUL ANAL
Bwahahaha!!! I really should have swallowed that last swig of...soda before reading this one.
In lieu of a Newsweek cover proclaiming that this market is just getting warmed up, could this be the tell that current [bear] market rally is finally nearing it's end?
Isn't their logo the same as Lime Wire? (File sharing app) Looks to me like someone is moonlighting.
Definitely. Unoriginal bastards ...
They are both owned by lime group. Isn't that reassuring?
http://www.limegroup.com/
http://en.wikipedia.org/wiki/LimeWire
This is like being at a party when, out of nowhere, you see the drunk guy with the lamp shade on his head. That's when you know it's time to quit drinking and go home.
Rainman, I love your comment but in the interest of seeing both sides of the trade we might look at it from this point of view.
When you see the drunken guy with the lamp shade on his head, you know all the smart money is headed home and the lamp shade guy's unguarded wallet is now available for appropriation.
At the same time, your cohort is pulling wallets and purses form the gathering crowd. The greater fool theory.
Most people think there are a finite number of (greater) fools in the universe. I contend that the world wide supply expands and contracts based upon the amount of available alcohol and market liquidity.
DIY HFT party clip:
http://www.youtube.com/watch?v=smrJ7459pj0
TD,
i have been reading your thread for a while and while some content has merit your inability to expand seriously discuss or frame your HFT negative stance leaves me saddened. You obviously are still wanting for the days of gordon gekko or at least the wonderous mr blodgett when the pump and dump did need such a high level of math in order to succeed. Times are changing....and you are being left behind. Take a peak at the item pasted below.... it may help you a bit to take in this engagement and realize there are merits to the hft world.
Wednesday, October 28th (Registration deadline - Monday midnight, Oct 26th.)
Professional Programs - Finance Series
Joint event with Courant Institute of Mathematical Sciences, New York University
A State Variable Model of Changes in Equity Security Risk
Speaker: Dr. Dan diBartolomeo, Northfield Information Services
With the proliferation of algorithmic trading, derivative usage and highly leveraged hedge funds, the investment community has increasing need for risk models focused on much shorter time horizons, often shorter than a single day. This presentation provides a Bayesian analytical framework for combining external information sources with traditional longer horizon risk models in order to get a coherent measure of risk across the entire horizon spectrum from intra-day to one year. These new information sources include implied volatility from stock options, the cross-sectional dispersion of security returns, rescaled-range volatility estimators, and sentiment descriptors derived from the frequency and content of text news reports. Adjustments are also introduced for the different levels of serial correlation and kurtosis in high frequency return distributions.
Please, 157, tell me where I can buy one of them thar rescaled-range volatility estimators.
I want to be rich. NOW !!
C'mon man, the point is that we built capital markets for the purpose of 'allowing individuals to invest in companies, and allowing companies to access a broader investor base.'
Trailing 5-minute VWAPs have nothing to do with future cash flow prospects of a company.
We could trade anything with HFT - tulips, whatever, it doesn't matter. But you can't trade tulips right now because first you have to aggregate massive amounts of capital under a guise of 'global capital market' necessity.
If we lobbied hard enough to convince enough people (and the Fed) to trade tulips, we could HFT those bitches.
You can build the playground and HFT all you want, but you shouldn't use taxpayer money to build it. Use your own money.
Nice try troll. Tyler and others he has posted here have made the point quite clearly. Go spam your engagement elsewhere.
.
Classic. So simple! Just plug in - no problem!
HFT is getting crowded, the fundamental crowd is worthless in this environment, other assets are artificially inflated.....danger.
While HFT has certainly become a joke, its legal...and adds just as much value as the fundamental guy crunching balance sheets (which are all fake now). So, you either chase fake bids and blinking lights, or fake balance sheets and flickering off sheet liabilities. Your choice...but neither is exactly better than the other.
What about illegal front running? Isnt that the real problem with so called HFT?
while there are likely HFT traders illegally front running, HFT does not mean someone is frontrunning. In fact, many HFT are prop operations with zero customers/zero customer flow. HFT certainly takes advantage of orderflow imbalances, however isnt that every business in the world?
Also, while you may be up in arms re the information curve, lets never forget how much information the Pimcos and GS of the world get before others. They get high frequency fundamental information if you will.
My point is not to defent HFT. I am for killing all liquidity credits as well as implementing a minimum order duration of at least one or two seconds. However, this is a scapegoat of this website that lacks a lot of merit when compared to the issues and scams of the longer term money management firms.
Who is John Galt-anabe?
+1
To whomever asked above - Lime Brokerage and Lime Wire LLC are owned by the same person. You don't have to guess which one brings in more money.
In case you missed it, while not a HFT trader, the venerable John Meriwether is ready to destroy a new flock of shareholder capital. His 3rd life as a hedge fund manager commences.
http://www.fundmymutualfund.com/2009/10/john-meriwether-set-to-open-new-...
If not familiar with this fine man, his first devastating disaster was the birth of moral hazard and "too big to fail" in 1998 - Long Term Capital Management.
Speaking about zombies...
Isn't that the same John Meriwether of Soloman Bros fame?
Si.
John Meriwether heard that bailouts, HFT, and compensation restrictions were all back in the "Lime" light, so why not give "that hedge fund thing" one more shot...
"C/C++ and Java trading APIs for simplified trading"
HFT implemented in Java? Now that is a joke.
Yikes!
TD's comments about Sparc assembly language are more in the right direction.
"HFT implemented in Java? Now that is a joke."
Shut up. You know nothing.
I happen to think that Java and HFT are a match made in Seattle.
http://farm1.static.flickr.com/81/234910745_34415dad47.jpg?v=0
I encourage you to write your HFT code as close to the metal as possible, so that your mistakes in pointer and memory allocation usage lead to completely unpredictable results that will provide us with maximum amusement.
So can I bust out some old skool Fortran skilz?!?
Nawww, I'll roll F# instead.
Your desk awaits.
http://www.columbia.edu/acis/history/029.html
"A fool and his money are soon partying".
AWESOME
Is this the next Black Swan event? Companies no larger than J6P and his friends on a Saturday night shooting algos into the market. Can TV commercials for this sh*t be far behind?
It is sad to still see some people who come here who thinks that math and thrmodynamics has anything to do with investing(beside the few operations that you need to read a balance sheet).Yes math has something,which is dos or mac,airplanes or ships,light bulbs and the other innovations that drive investment,and not software that let you frontrun.In fact, a much simpler approach would be what some car dealers do in cars auctions:bring a couple of friends who bid on your car and hype the process without the intention of buying the car,rather just inflate the price and trap one of the real participants.That is exactly what brought the economy to the current situation:the belief that derivatives are not a zero sum instrument(as stated by Alan Greenspan in the mid nineties). Whether he realy believed that or not,is not the issue, But probably a lot of people believed it. And since we have such a wonderful market and advances in math and trading softwares,why are we almost 25%down (in real dollar)after 10 years of implementing those advances,and many trillions in bailouts?. May be those old style investors,who don't use calculus1-4,or differential equations in their investments,know something or two that those softwares don't. And just if you are in doubt,look at last year performance,everybody was down,the housewives and Citadel with all their cutting edge technology.
Let us explain how perverse this so called HFT (i.e. auto-injectors, algorithmic trading, and etc.) practice is (and at times, how inefficient it can be also). We trade a broad range of products. Roughly 4-5 weeks ago, we conducted a small sample experiment in the after hours market in two commodity instruments; crude oil and natural gas. Each night we instructed our desk to place bid and offers "in between" the bid/ask on the electronic screens. In 91% of the time, the "electronic system" would "instantly and immediately" jump in front of our bid or offer each time we placed an order (price didn't seem to matter). What was interesting however is... if, and when, we got filled inside, or in between the system's bid/ask offers, the same system would then scramble (i.e. chase our price) up or down in order to cover (or offset) our particular fill in both size and price. Here's what we found. In 37% of the time this occurred, we then could control the direction of the price of that instrument up to .8 of 1.0% of our fill. Beyond that (.8% of the 1.0% average) the "system" would cease chasing our artificial injection of price and size. Our opinion, these so called HFT systems are NOT as efficient as they, or the market would like all of us to believe. There is just less volume in the markets today to offset them right now. Another conclusion (our opinion), if and when vol picks up, they will blow out the parameters or deviations their models are programmed to mimic and exasperate the trend. Black Swan someone said above, one only has to remember LTCM. This too will end - in time.
purely for color, and not to defend anyone - - -Everyone needs to be aware that these kind of algorithms are used as much by the buyside as by prop desks trying to make money HFT. Even Themis themselves will use extremely short term algos in order to place bids/asks depending on liquidity and supply and demand. This is to fill orders for longer term fundamental fund orders. So, in effect, all of Wall St is implementing these strategies - from the long term 401k managers to the day trading prop firms. It aint evil, its what has evolved and almost everyone trading stocks is either directly or indirectly involved in this space - whether you know it or not.
"It aint evil" WTF you mean "It aint evil" ? Are the HFT making money- YES, BY THE BOAT LOAD ! Where these money come from- the investor and the company traded. Parasites. It is more then evil !
Most investors invest via large mutual funds. These mutual funds use extremely short term trading strategies when buying or selling stocks - including flashing bids and stepping in front of size. They do this by sending buy and sell orders to brokers like Themis - who then implement extremely short term trading strategies to fill their orders. So, mom and pop, will they are totally unaware, are using HFT like strategies to fill their 401k contributions.
Thats reality.
O, so you mean even more parasites, I meant traders are feeding off of my
401k than I thought ??? I am shocked !
I refuse to recognize "everybody does it" as an argument in defense of parasitic behavior.
All parasites need to start doing something that produces value- churning money does not.
"HFT systems are NOT as efficient"
Define "efficient"- they certainly are efficient in making goldman etc a boatload of money, are they not ?
This is in essence cyber war- one algo trying to screw another. So the day when some algo-LTCM blows up is baked into the script. What pisses me off is that in terms of computing power humans are no match for computers, so it is deeply unfair to let humans and computers play on the same exchange. Kick the computers on their own exchange, but then, it will be pure gambling, becomes too obvious- no more "providing liquidity (my ass) [by fleecing you sheeple] ?
Besides, issues like gambling with taxpayer money, too-big-to-fail, systemic risk, this whole thing is sick...
I'm good with c++, anyone want to pay me to develop their HFT software?
That avatar, man...
What was you wanted to be paid for, again ?
Or you can pay me to hold you to my oversized man-boobs if you'd like.
You'd do stuff for buck man, I see...
http://teamassignment.com/images/forrest_puke.jpg
How cheesy can it get?? when you steal a logo from an illegal peer to peer downloading network?
Lime Brokerage has the exact same logo as Limewire the peer-to-peer file sharing application.
Are they the same people?
I contacted StreamBase themselves just to see how realistic the idea of mom & pop traders using StreamBase for HFT actually is. Here's a snippet from the e-mail thread between me and a StreamBase representative.
> How many developers does your firm have on staff at the moment?
> Justin
>> None; I'm an independent trader.
> ah, well you’re going to need a few of those – we can supply professional services people
> to build out your system, but this is probably not quite what you were hoping for.
> Right now we don’t have any independent traders as customers today, not least because
> of the costs of provisioning all the services needed to accomplish hf trading.
Link,
Would you mind forwarding that email thread to me? Let me know, and I'll temporarily post my "offshore" email address for you.
That has got to be some funny shit!
Step #1) Step right up for your chance at "Steamroller Chicken"!!!! Only $19.95, to play.
Step #2) You're good at this. You're fast enough! Grab silver dollars 50 times from in front of steamroller. No one can stop your early retirement now!!!
Step #3) Screw the 51st grab and get crushed hand, minimum. Lose all winnings, opportunity cost, and medical co-pay.
Step #4) Don't learn from your mistake! Try try again! (After you've unflattened, of course.)
Poor suckers...
-u4yeah4
Concerning the "19 year old mathematicians"... TD, don't be too harsh on those kids. Blame the game, not the players - Please! :)
This is awesome! HFT for hobbyists, gonna give it a try.
It'll probably be some time before I put my trading system together, but then again, I go after 10 or 20 cents on easy setups.
Cheeky bastard, keep throwing up in your mouth. :)
jesus you guys are actually proud of your stupidity. i really hope any of you do trade, you will always lose. re-read those chapters on trading psychology!
StreamBase is at least $100k per year. If I were trading from home I would need to have about $100mil in my trading account to need a tool like that, depending on what markets I was trading. So have no fear Tyler is misdirecting you once again.