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Ask HN: Anyone making money through algorithmic trading?

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Re: Ask HN: Anyone making money through algorithmic trading?

#91

Post by nwsm »

starpilot wrote: post #88
drumttocs8 wrote: post #67

Earlier quoted context omitted.

500-1000 usd generated from how much existing capital? What kinds of return?

This is one of my pet peeves about self-reported returns on the internet. It's always the case that, if they report absolute returns, they're starting from huge capital and getting 0.00001% gains. If they give relative returns, then its miniscule trades with no market impact and no slippage.

And also the fact that the people who used a similar strategy to trade and only ever lost money are posting about it.

Re: Ask HN: Anyone making money through algorithmic trading?

#92

Post by aaavl2821 »

ww520 wrote: post #53
windowshopping wrote: post #22

Earlier quoted context omitted.

Mostly I believe this too, but I am familiar with some people who can consistently make money year after year. From talking to them it becomes clear that they understand things very, very deeply. See /u/Fletch71011 on reddit-- he's always happy to discuss things. He's made millions trading options, mostly algorithmically as I've understood it. The methods he uses are sufficiently complex that you need to be very well…

Be careful with volatility. I don't know what he's trading on exactly. But a big part of volatility trading is selling insurance, i.e. selling insurance against the direction of S&P. You can make a lot of money collecting insurance premium, but on the event of a payout, like a sudden big drop in S&P, the loss can be very substantial. See XIV and SVXY in February of this year.

if you delta hedge (ie taking opposing positions in the underlying and the derivative, ie selling a call and buying the stock and then constantly readjusting your position), you can protect yourself against small / normal changes in price of the underlying, but if there are big jumps in the underlying, and acceleration of delta (ie gamma) you can lose a lot.

Re: Ask HN: Anyone making money through algorithmic trading?

#93

Post by baccredited »

seiferteric wrote: post #87
baccredited wrote: post #74

Earlier quoted context omitted.

Not being sarcastic or proud, I know I (barely) lost. Just stating the facts. Obviously over a long term horizon of like 10 yrs I expect to beat the S&P or I would be spending my time elsewhere.

Well good luck. It's just too easy to fool your self in an up market. It would be much more interesting to see your results in a down or sideways market.

A fool would judge their algorithm based on ANY single year's performance--up down or sideways. Moving averages over 5 or 10 years are what matter.

Check out Berkshire Hathaway's performance. There are plenty of years they have UNDER performed. But they are doing OK.

http://www.berkshirehathaway.com/letters/2017ltr.pdf

Re: Ask HN: Anyone making money through algorithmic trading?

#94

Post by madeuptempacct »

Wrote a cross-exchange arbitrage cryptocurrency trading app looking at hundreds of pairs and 5 exchanges. Dead in the water - transaction times too slow, APIs too unreliable, etc.

EVEN if none of that was an issue, legal transaction limits make it impossible.

Re: Ask HN: Anyone making money through algorithmic trading?

#95

Post by baccredited »

samfisher83 wrote: post #86
kornish wrote: post #62

Earlier quoted context omitted.

Interesting note: the S&P 500 with dividend reinvestment returned 21.14% in 2017 [1]. [1]: https://dqydj.com/2017-sp-500-return/

If you bought and held an index fund for a year you got taxed less as well.

Yep if I can't overcome the drag of long-term capital gains over several years I will pull the plug.

Re: Ask HN: Anyone making money through algorithmic trading?

#96

Post by fullstackchris »

inputcoffee wrote: post #28
windowshopping wrote: post #22

Earlier quoted context omitted.

Mostly I believe this too, but I am familiar with some people who can consistently make money year after year. From talking to them it becomes clear that they understand things very, very deeply. See /u/Fletch71011 on reddit-- he's always happy to discuss things. He's made millions trading options, mostly algorithmically as I've understood it. The methods he uses are sufficiently complex that you need to be very well…

I am not sure I understand this. It takes just as much skill to guess if volatility will go up or go down as it does to guess if prices will. The best models we know of (say GARCH) will still pace the information in the option prices.

A key part of how options premiums are priced is the expected, or implied volatility (IV) of the underlying (the stock/future/whatever). Therefore you can be an options seller (selling calls and puts) to get high premium, expecting that before the options expire, the IV of the underlying will decrease, making it more likely you can keep the credit received from selling those high-IV priced options. It can also be historically shown that the IV for any underlying is about 75%-80% of the time overestimated, in which the price of the underlying turns out to not be as volatile as what was suggested by the IV.

Re: Ask HN: Anyone making money through algorithmic trading?

#98

Post by headmelted »

I hacked together my own scripted system that would arbitrage cryptocurrency across exchanges.

It worked (for the most part), but it's been abandoned now. The best way I can think of to describe why is to say that while the low hanging fruit exists, there's far too little juice in it for it to be worth the squeeze.

Others have explained that the problem they've encountered is counter-party risk in that some exchanges may not allow you to withdraw, or the prices may be skewed because they're charging absurd withdrawal fees.

None of this was a problem for me - I found the exchange APIs almost universally hold that information somewhere if you hunt around enough for it, so I was able to account for this when scoring opportunities.

My reasoning was that from a birds-eye view it looked like the price differences were allowing for trades that would have a 1-2% difference. I reasoned that if I were to withdraw directly to the wallet of another exchange I could have a turnaround time on some currencies of less than five minutes start to finish - even 0.1% every hour would be an incredible rate of return when extrapolated to a yearly ROI.

In reality, while currencies did (and do!) trade with that difference frequently between exchanges, the volumes are tiny. Despite having funds to spend, there weren't any big-money buyers at the destination exchange, and within a couple of dollars (literally a couple of dollars) the bids at the destination exchange were back below the price of the source exchange, and I'd be in the red on the transaction.

Add in the fees, and there was vanishingly little profit to be made while taking bet-the-farm risks that whoever runs the exchange isn't going to elope with your bitcoins.

It was a good learning experience, though - so I'm ultimately glad I took a run at it.

Re: Ask HN: Anyone making money through algorithmic trading?

#99

Post by iliicit »

I made some good money (millions) in 2017 by algo trading crypto. Now in 2018, the bear market is on, but my pnl is still decent. I collected data, trained models, wrote execution strategies, automated everything. I was successful because I was moving fast, trying things, breaking things, etc.

While crypto was and still is my turf, I think I could also do well in the stock market. The problem is that the entry barriers in the stock market are quite large. By my estimates, it will cost between 10k and 100k a month to run an HFT strategy fast enough to compete with the fastest players in the field (e.g. running market making strategies). If you have good alpha you could probably get away with slower and cheaper access.

In the crypto world, the market access is free for all, and everybody has equal standing (from what I know). After implementing some WebSocket/JSON APIs you get access to the market that turns around 100s of millions USD per day. Of course, it's much smaller than the stock market, but it's real nevertheless.

I think it's a myth that smaller strategies cannot compete with established HFT firms. It's also a myth that you need grad level knowledge of math/statistics. It might even hurt, becuase phds will be prone to "do things the right way" as opposed to "do things that work". I think it's also a myth that HFT firms hire exceptional talent. In fact, most firms have rather mediocre staff. The reason is that most firms don't make exceptional money. So they don't have a salary pool large enough to pay exceptional people exceptional wages. I'm talking upward from 300k. Companies like Google will happily pay skilled engineers around that watermark. The Google/startup jobs might feel dull, but the finance jobs are way more boring and less rewarding... I can rant on this forever - lol.

That being said, I consider myself mediocre developer as well. Couple months ago I applied for Senior Developer jobs at 3 firms and didn't get a single job offer. I didn't try hard, didn't prepare for the interviews, but still.

Edit: I applied for these jobs just to see what's up. Neve intended to take the jobs.

Re: Ask HN: Anyone making money through algorithmic trading?

#100

Post by kgwgk »

nostromo wrote: post #89
ww520 wrote: post #53

Earlier quoted context omitted.

Be careful with volatility. I don't know what he's trading on exactly. But a big part of volatility trading is selling insurance, i.e. selling insurance against the direction of S&P. You can make a lot of money collecting insurance premium, but on the event of a payout, like a sudden big drop in S&P, the loss can be very substantial. See XIV and SVXY in February of this year.

Trading volatility might imply that he's buying options in both directions. Big moves either up or down would be profitable. The only unprofitable move here would be no substantial moves in either direction. (In which case you lose your entire bet, but no more.)

> Big moves either up or down would be profitable.

The problem is that much more often than not the “only unprofitable move” is the one that happens. Options in general are too expensive and that’s why selling “insurance” is profitable most of the time. Maybe he can identify consistently mispriced vol, though.

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