High Frequency Trading!

Is there anything new under the sun? Are any of you successfully doing HFT?

Be cool to hear about it...

People tends to be a bit secretive about these things...

Nowadays you also have to be careful - if you e.g. are at a dinner party and tells that you do HFT... your uncle might suddenly remember that his stocks lost 50% of their value in 5 minutes due to that thing called "HFT" he heard about in the "news"...

Regardless, this might have your interest (it should probably have everyone's interest...):

http://www.advancedtrading.com/algor...requestid=6157

"... most high-frequency trading is occurring on FX ECNs." Which ones? Who will let the small player in and not consider his winning HFT "toxic flow"...?

"...between 2002 and 2006, driven by latency arbitrage strategies in the first wave of high-frequency trading firms. As a direct consequence of this experience, the banks initiated massive overhaul of their trading infrastructure, not only focusing on drastically lowering latency levels within the single bank platforms, but also on developing more efficient pricing engine and internalization capabilities to better manage their risk books against different types of customer segments. It was also during this time that the banks decided to kick out those high-frequency trading firms whose relationships they deemed unprofitable.

Since 2008, however, banks and certain segments of the high-frequency trading community are attempting to peacefully co-exist. As banks continue to increase their internalization efforts, potential liquidity from high-frequency trading firms has become more attractive. On the other hand, high-frequency trading firms have come to realize that banks have a vital position in the FX market; in order to ensure continued success, co-opetition has become a competitive necessity.
FX high-frequency trading is poised to grow quite rapidly over the next few years, as the first-generation high-frequency trading firms are joined by an influx of next generation equity and futures high-frequency trading firms looking to capture uncorrelated alpha in FX. At the end of 2009, high-frequency trading accounted for approximately 25% of overall trade volume. This figure is expected to hit more than 40% by the end of 2012."

So, is latency arb just a fond memory now? And is it realistic to expect that there may be room for a "retail" (i.e., small) trader in this gravy train?

http://www.advancedtrading.com/algor...leID=220300267


"Eric Karpman, CEO of Trading Strategy Group and Luxoft Trading Solutions, adds that high-frequency trading requires immediate, real-time data analysis, which leads to automatic trading decisions. "It means analyzing what is happening in the market on the spot -- without the time to store the data in a database -- doing automatic tick-by-tick analysis and making decisions based on that," he adds."

OK, I have ask a dumb question - is this type of data acquisition offered to retail traders in the usual brokers' API's & if so, which ones? Are any of you doing this on the 1-second to 5-second timestep fx data?

Does retail have the cash to buy a $800K ultra low-latency router? I know people working for HFT firms which have this kind of hardware.

Does retail use specialized linux kernels with rewritten networks stacks, which squeeze a few more microseconds? Oh wait, I forgot, retail uses MT

They are talking about milisecond and microsecond level trading. BTW, they are talking about ticks, not bars. 1-second and 5-second are bars, not ticks.

Google for "ticker plant" if you want to know how they collect/store/distribute the data.

No - it would pretty much be a contradiction. If you build the infrastructure to compete in this field, you are by definition no longer a "retail" trader.

But the entry level is lower than people generally thinks due to increased competition everywhere in the industry. In the end it comes down to whether or not you are able to designing a HFT strategy. Speed is an absolute necessity, but in most cases it won't do it alone - you still need an edge.

BTW, I coincidently noticed that a search on "forex high frequency trading" on Google ranks this thread on top of page 2. Let's see if we can make it to page 1 (not even sure it's a good idea...)

High frequency, ultrahigh frequency, low latency, superduper low latency. Sheesh. Alls I wanna do is make a few hundred 5-10 sec trades a day. And now I feel really slow.

how do banks profit on the currency market using HFTs????

what are their goals in terms of pip profits?

http://finance.yahoo.com/news/Secret...1&asset=&ccode=

....SO, if HFT accounts for decreasing spreads in equity trading, when will the same result arrive for fx trading? If anything, retail spreads appear to be static, while HFT and associated liquidity keep growing....

[quote=The Fool;3726888]http://finance.yahoo.com/news/Secret...1&asset=&ccode=




Interesting...

It is possible that HFT will improve liquidity on some FX ECNs, however as a retailer FX trader you trade in an artificial market so it will not benefit you directly.

Not all high frequency strategies are liquidity providing though. Some are taking liquidity and some are mixes of taking and providing liquidity.

Automated HFT computer systems. It's known Goldman Sachs has such a system for their own profit basis motive, not intended for client money.

BTW, article I'm reading on Flash trading.

http://www.huffingtonpost.com/2010/0..._n_577557.html

I used to work for a company that provided the infrastructure for HFT traders, both on the FX side and equities.

NONE of them use MT4. It's either all home grown stuff, or they use some overpriced outdated portware solution.

A typical FX customer would drop a server at a co-location site and get direct access to an ECN. There are several good ones, but for example, currenex white/black boxes their product for several other firms, so you really need to know what you are looking for.

Ahead of time the FX customer needs to get a relationship with a clearing firm. you can trade through your favorite ECN, but at then end of the day you pay/get your money from the clearing firm (Goldmen is one odvious choice).

Once you get your server connected, clearing firm set up, account with ECN established, all you need to do is have a working stratagy.
Some guys would make 5000 FX trades a day, others would take 20. but the key is that it is all automated and it's all direct with the ECN's or the banks themselves.

if you want to talk equities, one of the customers was doing arbatrage between BATS and NYSE ARCA. For example, buy 100 shares of MSFT on BATS and sell it at the same time through ARCA. Yes, the bid/ask is small, but you do it 5000-10000 times a day and you can make your money.

The reason nobody talks about how this stuff works is because these highend guys would rather cut your mothers throat than to have their baby brainchild ideas known to the world.

But like anything else in the markets, any HFT algo is only good for so long before it no longer works for those market conditions.

Tick data is a business all of its own. Yes there are ticker plants out there, but it can all be a hugh mine field. Plus, say, tick data from one ECN can look different from two other ECN's.

Flash trading is/was an interesting concept but it was not as evil as it was made out to be once you understand the concepts behind it.

My two pips on the subject anyway. I used to give training presentations when new people would be hired in for support.

to make your head feel like Jello would take about 15 minutes, to finish the presentation would take two days.

I red some articles about it but have found no answers so far: Is there anyone knows the minimum bandwidth limit we need to make successful HFT, (or to catch best spreads instantly while scalping). Especially from a distant sever?

Not sure about he first point => the hedge

Old thread i know..
but just for those interested in HFT details (non Fx)

Timings between major exchanges (in microsec's)
Source: Nanex(Eric)

Very very interesting article about HFT (its creating and pitfalls)
https://meanderful.blogspot.com/2018...-hft-firm.html