This should have an extra clause: and that properly accounted for their per-trade profits in taxes.
Ask HN: Anyone making money through algorithmic trading?
161–170 of 254 posts
Re: Ask HN: Anyone making money through algorithmic trading?
#162wouldnt you rather do something to earn money?
Doing things doesn't really earn money these days. Perhaps someone is better off playing the game to earn money and then doing something positive for no money.
there are plenty of ways to make money doing things. playing the game and then doing something positive is also a legitimate option, so long as the game has no negative externalities (and it often does).
Re: Ask HN: Anyone making money through algorithmic trading?
#163wouldnt you rather do something to earn money?
petting your trading bots is doing something
Re: Ask HN: Anyone making money through algorithmic trading?
#164Re: Ask HN: Anyone making money through algorithmic trading?
#165I know a few people doing this, one person in particular who has discovered a near-zero-risk quirk that can be exploited with algorithms for fractional %age gain per transaction/cycle/ (kind of being vague here sorry) . He's been able to deploy large $MM amounts of capital to create significant gain nonetheless. However none of them will talk about it, certainly not on HN. I'm mentioning it simply to highlight I thin…
Crypto or the stock market?
Divulging that is probably too much detail.
Re: Ask HN: Anyone making money through algorithmic trading?
#166Earlier quoted context omitted.
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.)
Could you expand on how that would work? If X is priced at 10 units of currency, and I promise to buy 1 X for 11, and to sell 1 X for 9. And X stays available for 10, I end up paying 11, receiving 9 - netting a loss of 2. If I manage to promise a sell/buy at 10, I even out. What do I lose with low volatility? And how do I make money "both ways"? Clearly I lack a basic understanding of the concepts involved.
"Volatility" in the term "Volatility Trading" does not mean the stock's movements, it is a way of measuring the excess value in an option beyond what the parameters of the option would imply. That excess value is usually referred to as the market's assumption about the future volatility of the stock, but really its just an error term influenced by market participants based on supply and demand. Low volatility means "pretty close to its theoretical value assuming no volatility" or to put it another way: "cheap" i.e. good for buyers and bad for sellers.
Sort of like how different companies with the same cash flows can trade at different multiples, otherwise identical options in two companies (or different expirations/strikes in the same company) can trade at different prices because of the opinions of market participants. Volatility traders act when the different prices/error terms are too far apart, counting on the prices/error terms to converge a.l.a. pairs trading.
Since they are trading the error term directly, they attempt to construct positions that remain relatively flat in value as the stock moves around, but are designed to only change in value when the error term changes. That is how they can make money "both ways", because they can profit if the stock goes up, down, or stays the same, as long as the error term moves in the correct direction.
The reason you only see sophisticated people doing this kind of trading is because you need a large and complex position with many hundreds of options to be in a truly market-neutral environment. You can't take advantage of mispricing without such a large position because buying/selling single options involves a tremendous amount of risk, so you need to do that as a part of a larger portfolio to spread that risk. Retail traders tend to spread the risk by doing 2 transactions (the mispriced option and a well-priced but mirrored hedge option), but that is a) much more expensive from a commissions standpoint and b) really limits the range of market-neutrality forcing you to adjust more frequently to stay market-neutral, again, with commission costs.
Re: Ask HN: Anyone making money through algorithmic trading?
#167Efficient market theory prevents predicting prices to a certain extent. But algorithms can take out emotions in trading and can limit your losses.
But efficient markets are not a law of nature. Depending on context (e.g. HFT) it might be a wrong assumption.
HFT is what makes the markets efficient, at their own profit.
Re: Ask HN: Anyone making money through algorithmic trading?
#168I 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 barrie…
Give me your secrets
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Re: Ask HN: Anyone making money through algorithmic trading?
#169Earlier quoted context omitted.
A 50% chance to lose money per year still allows for very long strings of success. Some strategy's trade ~80% chance of a small win for a ~20% chance of a large loss which means lucky streaks could last for decades.
So, basically you are saying that it's all gambling and nobody has a better strategy / better information than everybody else. Some are just lucky and it is all because of the survival bias. I agree with you in that it is a possible explanation, but I disagree in that it is the only one possible.
I feel that what he's saying is that it's hard to tell if somebody actually has a working strategy or it's just gambling, they can be nearly indistinguishable, and (given the number of people) someone showing a streak of successes is really not much evidence that it's something beyond luck.
They may have something, but since you can't determine if it's so and there is a lot of just gambling, then most likely it's that.
Re: Ask HN: Anyone making money through algorithmic trading?
#170Earlier quoted context omitted.
Could you expand on how that would work? If X is priced at 10 units of currency, and I promise to buy 1 X for 11, and to sell 1 X for 9. And X stays available for 10, I end up paying 11, receiving 9 - netting a loss of 2. If I manage to promise a sell/buy at 10, I even out. What do I lose with low volatility? And how do I make money "both ways"? Clearly I lack a basic understanding of the concepts involved.
"Volatility" in the term "Volatility Trading" does not mean the stock's movements, it is a way of measuring the excess value in an option beyond what the parameters of the option would imply. That excess value is usually referred to as the market's assumption about the future volatility of the stock, but really its just an error term influenced by market participants based on supply and demand. Low volatility means "…
So it's "buy low, sell high" - but for options, not stocks?
[ed: that's to say, you need a way to get more/accurate pricing information than reflected in the market - but for options, not assets]