4 ms·

I'm not exactly sure what you're asking. What's the goal of building a trading system? As someone who's worked on trading systems in a professional setting I'

I'm not exactly sure what you're asking. What's the goal of building a trading system? As someone who's worked on trading systems in a professional setting I'll give some thoughts. First and foremost the goal is to make money. I guess some people build these systems for fun/hobby or for the challenge/educational value. But huge amounts of money are spent on trading systems, with the goal that they increase profitability. Sometimes that means maximizing returns, sometimes that means assisting traders. This is a very large market, with very diverse types of end-users. I believe crypto is similar, but a microcosm of the broader trading environment (with some of its own cyrpto-specific idiosyncrasies). You have some "HFT" traders, "institutional", HODLERs, etc... Each has different objectives and skill sets. A trading system has a different value proposition for each trader's needs and objectives. In terms of a 100% automated market, that's an interesting question. The biggest world markets are very highly automated, such as the equities market. Google "hft percentage of volume" and you'll find various sources claiming up to 70% of the equities volume is HFT. Since HFT trades complete in micro-seconds, this is fully automated trading. The Flash crash was partially blamed on a high-level of automation, were a trader was trying to game the response to large orders[1]. I think a 100% automated market would collapse. Even the 70% automated market of equities has shown some scary positive feedback loops that need human intervention. 1 - https://www.bloomberg.com/view/articles/2015-04-21/guy-trading-at-home-caused-the-flash-crash https://www.bloomberg.com/view/articles/2015-04-21/guy-tradi...

bduerst 9y ago
>I think a 100% automated market would collapse. Even the 70% automated market of equities has shown some scary positive feedback loops that need human intervention. Which is because the automation isn't capable of fully gaming itself yet. In game theory, you don't have to be the smartest person in the room, you just have to know what everyone else is going to do. In a ~100% automated market, whoever can identify the patterns emergent from the automated rules will be able to beat the automation.
notyourgrandma 9y ago
What do you think of db's recent decision to open-source their trading platform? https://www.db.com/newsroom_news/2017/deutsche-bank-makes-its-computer-code-publicly-available-for-the-first-time-en-11674.htm https://www.db.com/newsroom_news/2017/deutsche-bank-makes-it...
dpweb 9y ago
HFT strategies are of course secret but aren't they really taking advantage of: 1. Faster speed to market. Basically, front running 2. Extremely low transaction costs. Not available to the retail trader or even electronic mkt makers. 3. Extremely low time in each trade - when you dispense with bell curve predicting - risk becomes only the time you are not flat. These are NOT prediction of future price. HFT don't make money 'predicting' the market - they are too sophisticated as traders to believe that's reliably possible. It is to some extent, but its very hard and theirs is a better play.
- dsacco 9y ago
  > Faster speed to market. Basically, front running No, this is not basically front running. Front running has a very specific meaning. High frequency trading is not front running.
- physguy1123 9y ago
  1 - being faster isn't front running. Nobody can hop in front of orders that are already visible on the lit market. 2 - The electronic market makers ARE mostly hft and generally get the best transaction costs and other privileges excluding taker-maker exchanges. Take NYSE parity or CME mass quotes for example 3 - Somewhat true but not in general. Becomes a murkier quality when hft is combined with longer term signals > These are NOT prediction of future price. HFT don't make money 'predicting' the market - they are too sophisticated as traders to believe that's reliably possible. It is to some extent, but its very hard and theirs is a better play. This is completely wrong. Plenty of HFTs do prediction to varying degrees, one of the biggest HFTs almost exclusively trades on price prediction. Other don't very much but hedge in very sophisticated manners. The smallest group is those who just use speed and fee structure to make money. There are certainly benefits to speed however (fill rate at the very least) and the market leaders are both intelligent AND fast.
  - kayhi 9y ago
    1) yes, if a large order has to be fulfilled across multiple exchanges then there’s a race which HF can win

bduerst 9y ago

>I think a 100% automated market would collapse. Even the 70% automated market of equities has shown some scary positive feedback loops that need human intervention. Which is because the automation isn't capable of fully gaming itself yet. In game theory, you don't have to be the smartest person in the room, you just have to know what everyone else is going to do. In a ~100% automated market, whoever can identify the patterns emergent from the automated rules will be able to beat the automation.

notyourgrandma 9y ago

What do you think of db's recent decision to open-source their trading platform? https://www.db.com/newsroom_news/2017/deutsche-bank-makes-its-computer-code-publicly-available-for-the-first-time-en-11674.htm https://www.db.com/newsroom_news/2017/deutsche-bank-makes-it...

dpweb 9y ago

HFT strategies are of course secret but aren't they really taking advantage of: 1. Faster speed to market. Basically, front running 2. Extremely low transaction costs. Not available to the retail trader or even electronic mkt makers. 3. Extremely low time in each trade - when you dispense with bell curve predicting - risk becomes only the time you are not flat. These are NOT prediction of future price. HFT don't make money 'predicting' the market - they are too sophisticated as traders to believe that's reliably possible. It is to some extent, but its very hard and theirs is a better play.

dsacco 9y ago
> Faster speed to market. Basically, front running No, this is not basically front running. Front running has a very specific meaning. High frequency trading is not front running.
physguy1123 9y ago
1 - being faster isn't front running. Nobody can hop in front of orders that are already visible on the lit market. 2 - The electronic market makers ARE mostly hft and generally get the best transaction costs and other privileges excluding taker-maker exchanges. Take NYSE parity or CME mass quotes for example 3 - Somewhat true but not in general. Becomes a murkier quality when hft is combined with longer term signals > These are NOT prediction of future price. HFT don't make money 'predicting' the market - they are too sophisticated as traders to believe that's reliably possible. It is to some extent, but its very hard and theirs is a better play. This is completely wrong. Plenty of HFTs do prediction to varying degrees, one of the biggest HFTs almost exclusively trades on price prediction. Other don't very much but hedge in very sophisticated manners. The smallest group is those who just use speed and fee structure to make money. There are certainly benefits to speed however (fill rate at the very least) and the market leaders are both intelligent AND fast.
- kayhi 9y ago
  1) yes, if a large order has to be fulfilled across multiple exchanges then there’s a race which HF can win