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When trades are placed using a fixed setup of rules or algorithms it is called algorithmic trading. HFT is a type of algo trading where latency is one of the im

When trades are placed using a fixed setup of rules or algorithms it is called algorithmic trading. HFT is a type of algo trading where latency is one of the important rules. So, while all HFT trades are algo trades, reverse isn't true. AFAIK some(maybe a lot) of algorithm or quant firms hire people who can read the latest investment research, form a hypothesis and test out the hypothesis to see whether there is a winning system. A side tip - If someone says their algorithm relies on some sort of TA, run for the hills.

jmhyer123 9y ago
> If someone says their algorithm relies on some sort of TA, run for the hills. Care to explain? I'm genuinely curious as I've had some success in this area. Curious if I should be aware of something that I'm not...
- pphysch 9y ago
  Fundamentally, the history of a price has nothing to do with its future price. The laws of nature do not care if you are on a bull run. So TA is completely bunk in that regard. However, obviously many people do rely on TA, which means TA is influencing the price (you can beat their TA algo with your own TA algo). The problem is, you never really know what everyone else is doing. Relying on TA amounts to playing rock-paper-scissors, blindly, with 1000 opponents, and hoping you choose the winning move against most of them. Keep in mind there are only 2 outcomes, win or lose, and they occur randomly, so it’s really easy to fall victim to selection bias and think you have a winning TA-based algorithm.
  - jmhyer123 9y ago
    Makes sense, thanks for the explanation.
  - mathgenius 9y ago
    > Fundamentally, the history of a price has nothing to do with its future price. This is not true at all. Price movements show auto-correlation, for example.
- thisisit 9y ago
  TA indicators have number of flaws. One of the biggest flaws is that TA indicators tend to repaint. So an awesome winning MA crossover in hindsight might never really execute during real trading. Additionally using TA for trading also involves self-fulfilling prophecies. And if there are any markets which follow this prophetic tendencies - it is cryptocurrency.
- pingiun 9y ago
  Excuse me for being ignorant, but what does TA mean in this context?
  - vinceguidry 9y ago
    Trend analysis. Kind of the first thing they teach you in tutorials, I think mostly because it's easy to convey. I could explain it here, but you're better off reading the Investopedia article. https://www.investopedia.com/terms/t/trendanalysis.asp https://www.investopedia.com/terms/t/trendanalysis.asp
    - omarchowdhury 9y ago
      They do mean technical analysis.
  - deleted 9y ago
    [deleted]
qeternity 9y ago
These days, HFT mostly relies on buying uninformed flow and avoiding toxic flow. You need low latency but that race to zero is well underway. There's been some decent consolidation purely around gaining access to retail order flow.

jmhyer123 9y ago

> If someone says their algorithm relies on some sort of TA, run for the hills. Care to explain? I'm genuinely curious as I've had some success in this area. Curious if I should be aware of something that I'm not...

pphysch 9y ago
Fundamentally, the history of a price has nothing to do with its future price. The laws of nature do not care if you are on a bull run. So TA is completely bunk in that regard. However, obviously many people do rely on TA, which means TA is influencing the price (you can beat their TA algo with your own TA algo). The problem is, you never really know what everyone else is doing. Relying on TA amounts to playing rock-paper-scissors, blindly, with 1000 opponents, and hoping you choose the winning move against most of them. Keep in mind there are only 2 outcomes, win or lose, and they occur randomly, so it’s really easy to fall victim to selection bias and think you have a winning TA-based algorithm.
- jmhyer123 9y ago
  Makes sense, thanks for the explanation.
- mathgenius 9y ago
  > Fundamentally, the history of a price has nothing to do with its future price. This is not true at all. Price movements show auto-correlation, for example.
thisisit 9y ago
TA indicators have number of flaws. One of the biggest flaws is that TA indicators tend to repaint. So an awesome winning MA crossover in hindsight might never really execute during real trading. Additionally using TA for trading also involves self-fulfilling prophecies. And if there are any markets which follow this prophetic tendencies - it is cryptocurrency.
pingiun 9y ago
Excuse me for being ignorant, but what does TA mean in this context?
- vinceguidry 9y ago
  Trend analysis. Kind of the first thing they teach you in tutorials, I think mostly because it's easy to convey. I could explain it here, but you're better off reading the Investopedia article. https://www.investopedia.com/terms/t/trendanalysis.asp https://www.investopedia.com/terms/t/trendanalysis.asp
  - omarchowdhury 9y ago
    They do mean technical analysis.
- deleted 9y ago
  [deleted]

qeternity 9y ago

These days, HFT mostly relies on buying uninformed flow and avoiding toxic flow. You need low latency but that race to zero is well underway. There's been some decent consolidation purely around gaining access to retail order flow.