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Show HN: Stock Trading with Insomnia REST Client and Alpaca API

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Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API

#21

Post by mjlee »

paperwork wrote: post #14
JonasJSchreiber wrote: post #9

Earlier quoted context omitted.

And by selling info about customer orders to front runners. IIUC, these are high frequency traders who may place similar orders milliseconds in advance of yours then profit from the fact that you have to pay a bit more to fill your order. Full disclosure, I continue to use Robinhood despite this.

This is highly illegal and taken very seriously. Is this speculation on your part or do you know this for a fact (in which case, you should report it).

https://seekingalpha.com/article/4205379-robinhood-making-mi...

They're probably not front-running. They are almost certainly selling trade information to HFT firms.

Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API

#22

Post by gbrits »

vostok wrote: post #20
dplgk wrote: post #6

Earlier quoted context omitted.

What is order flow?

Seeing/selling order flow is a term of art in finance. Seeing order flow refers to the ability to trade against customer orders. Selling order flow is getting paid by someone else for the ability to trade against customer orders. Imagine that a stock is bid at $100.00 and offered at $100.01. Assume that market makers estimate the fair price to be $100.005 unconditionally. A customer sends a marketable buy limit order…

So the market maker who pays for order flow data takes the spread. But how are they able to trade with the buyer at $100.01 when there are limit asks on the book already at that price? Seems they need to cut the line?

Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API

#23

Post by vostok »

gbrits wrote: post #22
vostok wrote: post #20

Earlier quoted context omitted.

Seeing/selling order flow is a term of art in finance. Seeing order flow refers to the ability to trade against customer orders. Selling order flow is getting paid by someone else for the ability to trade against customer orders. Imagine that a stock is bid at $100.00 and offered at $100.01. Assume that market makers estimate the fair price to be $100.005 unconditionally. A customer sends a marketable buy limit order…

So the market maker who pays for order flow data takes the spread. But how are they able to trade with the buyer at $100.01 when there are limit asks on the book already at that price? Seems they need to cut the line?

That's part of thr reason that they pay for the flow. They're able to sell at $100.01 off exchange even if there was someone else who was willing to sell at $100.01 on the exchange first.

This also why I think payment for order flow is bad even if the first order effects are not bad for Robinhood customers under reasonable assumptions.

Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API

#24

Post by 55555 »

paperwork wrote: post #14
JonasJSchreiber wrote: post #9

Earlier quoted context omitted.

And by selling info about customer orders to front runners. IIUC, these are high frequency traders who may place similar orders milliseconds in advance of yours then profit from the fact that you have to pay a bit more to fill your order. Full disclosure, I continue to use Robinhood despite this.

This is highly illegal and taken very seriously. Is this speculation on your part or do you know this for a fact (in which case, you should report it).

Are you sure it's illegal in all cases? I was under the impression this was standard practice. https://www.cnbc.com/2014/03/30/michael-lewis-flash-boys-and...

Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API

#25

Post by dplgk »

vostok wrote: post #20
dplgk wrote: post #6

Earlier quoted context omitted.

What is order flow?

Seeing/selling order flow is a term of art in finance. Seeing order flow refers to the ability to trade against customer orders. Selling order flow is getting paid by someone else for the ability to trade against customer orders. Imagine that a stock is bid at $100.00 and offered at $100.01. Assume that market makers estimate the fair price to be $100.005 unconditionally. A customer sends a marketable buy limit order…

Why is this not just a spread and does RH not just have spreads to make money?

Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API

#27

Post by hartator »

ta1234567890 wrote: post #11

Open question: If, for one stock, you could predict tomorrow's closing price today (with 80% accuracy within 2% of the actual price), how would you trade that stock?

More than 80% of stocks will close within 2% of previous day closing price.

Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API

#28

Post by thisisit »

JonasJSchreiber wrote: post #9
gschier wrote: post #3

Earlier quoted context omitted.

Likely the same as similar services like RobinHood. A quick Google suggests they make most of their money on interest from cash sitting around in user's accounts that has not been invested yet.

And by selling info about customer orders to front runners. IIUC, these are high frequency traders who may place similar orders milliseconds in advance of yours then profit from the fact that you have to pay a bit more to fill your order. Full disclosure, I continue to use Robinhood despite this.

It is not front running. These HFT are called market makers. Essentially, brokers show you the NBBO - National Best Bid and Offer. When you place an order on that price, one of the many market makers will pick it up. At any given point of time they will hold multiple buys/sells. So, they make money by collecting the spreads.

Nearly all brokers tend to sell order information to one or many market makers. It is neither illegal nor harm retail customers, not unless these customers are trying to run some HFT algos on their own.

Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API

#29

Post by thisisit »

ta1234567890 wrote: post #11

Open question: If, for one stock, you could predict tomorrow's closing price today (with 80% accuracy within 2% of the actual price), how would you trade that stock?

The bigger question is - what happens if you get the price 20% wrong? This might look like a winning strategy in a normal and calm market. But, it'll take only one day to wipe out all the gains.

Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API

#30

Post by anonu »

9712263 wrote: post #26

Seems inherit the same limitation of RobinHood: you can't do short selling. Not sure how actually they could do a free commission order, so not sure why short selling is not supported, but it limits the use of long only strategy.

Interesting. I suppose it's a much more involved process where you need to locate shares to borrow. You need to maintain a list of easy to borrow and hard to borrow names. ETFs by definition are hard to borrow.

I used to work next to the stock loan desk at a bank. The equity markets are generally pretty tech driven these days but stock loan is still operating in a 1980s mentality.

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