7 ms·

I don't know anything about algorithmic trading, but I'm just wondering, are the people who do make money lots of money out of it, those who have servers close

I don't know anything about algorithmic trading, but I'm just wondering, are the people who do make money lots of money out of it, those who have servers close to the data source, who do high frequency trades.

harmegido 10y ago
No. Compare any big banks revenues from trading against the revenues of a public HFT firm like virtu. No contest.
cloudjacker 10y ago
algorithmic trading doesn't equal high frequency trading. people conflate these a lot even though they know better. high frequency trading requires algorithmic trading. but algorithmic trading can implement warren buffet or suzi orman's style if thats what you wanted.
- sjbase 10y ago
  Agreed, HFT has become a catch-all term for anyone trying to make a marketing/political statement about trading. Like the term "big data" - it's been used to describe so many things that it no longer describes anything. Another thing that gets ignored is the the difference between a trading strategy and an execution algorithm.
  - cloudjacker 10y ago
    I wish I could get some rest API and websockets into the debt and credit default swaps market, really inefficient markets that reveal a lot about sentiment don't need high frequency at all, just pretty average latency actually (for now anyway) IB probably has this, not sure though. But those data costs are a huge deterrent for me!
    - whatok 10y ago
      I think DTCC has some freely available live CDS data but I forget where and don't know how the APIs are.
    - sseveran 10y ago
      CDS and debt are not really inefficient markets. Some bonds are less liquid than others but there is currently a rapid conversion to electronic trading going on. CDS is also a very mature market. Not saying that those markets don't contain signal but they are not very inefficient.
      - cloudjacker 10y ago
        You're right, I would primarily like to see them more liquid so that there were more data points to extrapolate moves across different asset classes
        sseveran 10y ago
        What you really want is more transparent data. There are plenty of data points but they are not easily accessible.
        cloudjacker 10y ago
        and I think the lack of this perpetuates market inefficiencies. I think insights into CDS can be a leading indicator into equities and equity futures, yet CDS are restricted to OTC markets in the US anyway, I'm sure this is its own discussion
        sseveran 10y ago
        CDS isn't an OTC instruments. Swaps are now traded on SEFs like MarketAxess or TradeWeb. Just because you don't have access to the data don't think that professionals don't. But this isn't OHLC data for listed equities. Expect to pay. Actually high quality realtime equity data (ITCH,PITCH,OpenBook Ultra,etc...) costs real money as well. Checkout CDS and FI market data offerings: https://www.marketaxess.com/data/marketdata.php https://www.marketaxess.com/data/marketdata.php But your idea is correct. CDS Spreads can be predictive of dramatic shocks in an equities price.
        10y ago
howlin 10y ago
You can make money having by having better access like the HFT firms or by having data not widely available. You can also make money by applying well known principles more intelligently than others. This latter approach usually requires a lot of money. You can't afford retail brokerage costs when you're in a highly crowded and competitive trade. The best way to make some money as a personal trader is to take advantage of the liquidity premium in one way or another. Because you're trading money in the 5 or 6 figures rather than the 7 or 8 figures, you can take advantage of smaller opportunities without thoroughly distorting the market with your own trades. These smaller trades usually require research and market insight rather than clever algorithms. These trades are usually on financial instruments that don't have a lot of easily accessible data to build an automated trade on top of.
- deutronium 10y ago
  Thanks! That's a very insightful reply
- winter_blue 10y ago
  > You can't afford retail brokerage costs when you're in a highly crowded and competitive trade. This is very important. Most brokerage charge around $7 per trade, which makes high-volume trading very very expensive and prohibitive. Robin Hood is an amazing alternative that charges nada for trades, and once they have an API[1], I think they'd be a great choice for small-time developers looking to do some (low-frequency) algorithmic trading. [1] https://support.robinhood.com/hc/en-us/articles/210216823-Robinhood-API-Integrations https://support.robinhood.com/hc/en-us/articles/210216823-Ro...
  - flatM 10y ago
    If you're serious into retail algotrading, IB (Interactive Brokers) is the best broker you can get.
  - deleted 10y ago
    [deleted]
- empath75 10y ago

harmegido 10y ago

No. Compare any big banks revenues from trading against the revenues of a public HFT firm like virtu. No contest.

cloudjacker 10y ago

algorithmic trading doesn't equal high frequency trading. people conflate these a lot even though they know better. high frequency trading requires algorithmic trading. but algorithmic trading can implement warren buffet or suzi orman's style if thats what you wanted.

sjbase 10y ago
Agreed, HFT has become a catch-all term for anyone trying to make a marketing/political statement about trading. Like the term "big data" - it's been used to describe so many things that it no longer describes anything. Another thing that gets ignored is the the difference between a trading strategy and an execution algorithm.
- cloudjacker 10y ago
  I wish I could get some rest API and websockets into the debt and credit default swaps market, really inefficient markets that reveal a lot about sentiment don't need high frequency at all, just pretty average latency actually (for now anyway) IB probably has this, not sure though. But those data costs are a huge deterrent for me!
  - whatok 10y ago
    I think DTCC has some freely available live CDS data but I forget where and don't know how the APIs are.
  - sseveran 10y ago
    CDS and debt are not really inefficient markets. Some bonds are less liquid than others but there is currently a rapid conversion to electronic trading going on. CDS is also a very mature market. Not saying that those markets don't contain signal but they are not very inefficient.
    - cloudjacker 10y ago
      You're right, I would primarily like to see them more liquid so that there were more data points to extrapolate moves across different asset classes
      - sseveran 10y ago
        What you really want is more transparent data. There are plenty of data points but they are not easily accessible.
        cloudjacker 10y ago
        and I think the lack of this perpetuates market inefficiencies. I think insights into CDS can be a leading indicator into equities and equity futures, yet CDS are restricted to OTC markets in the US anyway, I'm sure this is its own discussion
        sseveran 10y ago
        CDS isn't an OTC instruments. Swaps are now traded on SEFs like MarketAxess or TradeWeb. Just because you don't have access to the data don't think that professionals don't. But this isn't OHLC data for listed equities. Expect to pay. Actually high quality realtime equity data (ITCH,PITCH,OpenBook Ultra,etc...) costs real money as well. Checkout CDS and FI market data offerings: https://www.marketaxess.com/data/marketdata.php https://www.marketaxess.com/data/marketdata.php But your idea is correct. CDS Spreads can be predictive of dramatic shocks in an equities price.
        10y ago

howlin 10y ago

You can make money having by having better access like the HFT firms or by having data not widely available. You can also make money by applying well known principles more intelligently than others. This latter approach usually requires a lot of money. You can't afford retail brokerage costs when you're in a highly crowded and competitive trade. The best way to make some money as a personal trader is to take advantage of the liquidity premium in one way or another. Because you're trading money in the 5 or 6 figures rather than the 7 or 8 figures, you can take advantage of smaller opportunities without thoroughly distorting the market with your own trades. These smaller trades usually require research and market insight rather than clever algorithms. These trades are usually on financial instruments that don't have a lot of easily accessible data to build an automated trade on top of.

deutronium 10y ago
Thanks! That's a very insightful reply
winter_blue 10y ago
> You can't afford retail brokerage costs when you're in a highly crowded and competitive trade. This is very important. Most brokerage charge around $7 per trade, which makes high-volume trading very very expensive and prohibitive. Robin Hood is an amazing alternative that charges nada for trades, and once they have an API[1], I think they'd be a great choice for small-time developers looking to do some (low-frequency) algorithmic trading. [1] https://support.robinhood.com/hc/en-us/articles/210216823-Robinhood-API-Integrations https://support.robinhood.com/hc/en-us/articles/210216823-Ro...
- flatM 10y ago
  If you're serious into retail algotrading, IB (Interactive Brokers) is the best broker you can get.
- deleted 10y ago
  [deleted]
empath75 10y ago