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Lessons learned building an ML trading system

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Re: Lessons learned building an ML trading system

#51

Post by Akababa »

symplee wrote: post #46
Akababa wrote: post #41

Earlier quoted context omitted.

Through hypothesis testing you can estimate the probability that this was due to luck is very low. Assuming that a monkey would have a 50% chance of profiting on a day, the chance of going a month without a losing day is less than 1 in a billion.

How many monkey bots are flipping the coin daily? Selection bias just needs one. I very much look forward to the author's follow up post at the end of 2020 to see if another 5k turns into 200.

You have to make some basic assumptions to do any statistical inference, because if you don't then literally anything can be explained by luck. For example, even if the author did a follow-up post (which I'd love to see as well!) every year for 30 years and made money every time, it could still be "selection bias".

The number of monkeys required to match the author's results over a 12-month period is well over the number of atoms in the universe.

Re: Lessons learned building an ML trading system

#52

Post by alexcnwy »

nickreese wrote: post #11

After having spent an insane amount of time in late 2017/2018 building an HFT bot for Binance I can say this is a pretty solid article. In our case we were doing triangle trading between BTC/ETH/USDT pairs and had our buys/sell delay down to 3-7ms. At one point moving 0.3-0.7% of Binance’s daily volume. Few notes: * Finding an objective point of truth for value when all of the currencies are floating is hard but vita…

Fascinating story, thanks for sharing!

"we realized that there will always been a better resourced or more dedicated team willing to fight you for your alpha" - that's part of what makes financial markets such a fun and interesting challenge but agreed, intermediary risk at the timescales you were operating at in this kind of unregulated market is real and not fun

I'd love to hear what problem you moved to that you believe you can build a long term competitive advantage on if you can talk about it?

Re: Lessons learned building an ML trading system

#53

Post by traK6Dcm »

onlyrealcuzzo wrote: post #7

Is this the author? I would love to know how this fared recently in the large sell-off. What he says about some markets possibly being predicable rings true to me. But the article was far from convincing that the BTC market is actually predicable. The natural assumption should be that the author was in the right place at the right time. Although he went through great lengths, I'm not convinced this is anything other…

Author here. Let's assume you cannot got short (which you can't in most crypto markets) and can only make money when the market goes up. The best you can do is avoid losing money when the market goes down.

But there are no pure market downturns. On a daily scale the market may be down, but that does not mean that on a millisecond or second-scale you will only see downward movement. There is just an overall downtrend, but there is still almost the same upward movement to make money. For HFT systems, it really doesn't matter if the market, on a daily scale, goes up or down. There is no difference.

In fact, on many markets the system does better in downward trends. Probably because there is more liquidity on that side of the book, a bias that may come from certain market participants.

Re: Lessons learned building an ML trading system

#54

Post by traK6Dcm »

echelon wrote: post #20

Can this same strategy be leveraged on zero-fee stock exchanges? Why is crypto the target here?

Author here. Perhaps if you already have existing HFT infrastructure and connections to efficiently trade on such exchanges. But such infra costs millions. If you don't have this, you're probably at too large of a disadvantage to find any alpha.

At least that's my understanding based on conversations I've had, I've never traded equities.

Re: Lessons learned building an ML trading system

#55

Post by nickreese »

alexcnwy wrote: post #52
nickreese wrote: post #11

After having spent an insane amount of time in late 2017/2018 building an HFT bot for Binance I can say this is a pretty solid article. In our case we were doing triangle trading between BTC/ETH/USDT pairs and had our buys/sell delay down to 3-7ms. At one point moving 0.3-0.7% of Binance’s daily volume. Few notes: * Finding an objective point of truth for value when all of the currencies are floating is hard but vita…

Fascinating story, thanks for sharing! "we realized that there will always been a better resourced or more dedicated team willing to fight you for your alpha" - that's part of what makes financial markets such a fun and interesting challenge but agreed, intermediary risk at the timescales you were operating at in this kind of unregulated market is real and not fun I'd love to hear what problem you moved to that you b…

My partner and I had built broadbandnow.com and were looking for a new interesting problem to solve to get us fire up again about fun tech problems. This just scratched the itch. The team was running day to day of the other business while we worked on the HFT bot.

Shortly after we realized we either should exit or hire an exec team to run the business. After a few months of executive search we found an offer we liked and took it.

These days I’m interested in using some heuristics based on public data to help consumers make informed decisions about nursing homes and in home health care. Still early on this project but lots of data and not many people looking to do good in that market. Seems like a great place I can add value.

Re: Lessons learned building an ML trading system

#56

Post by traK6Dcm »

gricardo99 wrote: post #2

Great post! Very refreshing to hear about a) the honest level of effort involved in this type of endeavor, b) the amount of nonsense trading advice out there. Maybe in a future post you could discuss the security and banking side of this in more detail? In the 6ish years I’ve played around with crypto trading (and I really mean play, nothing close to your level), I’ve had 2 exchanges hacked and lose all customer fund…

Author here. Honestly, I don't have a good answer. I spread my capital across enough exchanges so that if one runs away with it gets hacked it doesn't ruin me. It's just a risk I'm taking.

I'm also not trading much capital. Because the system is more on the HFT side, the actively traded capital isn't that high, and I don't care about losing it. Any profit I try to get out of the exchanges regularly. I wouldn't feel comfortable leaving large sums on those exchanges.

Re: Lessons learned building an ML trading system

#57

Post by traK6Dcm »

mtm7 wrote: post #8

I’m impressed with this system, but I’m even more impressed with the author’s writing style. I’d love to see more technical posts written with this level of clarity.

Thank you very much :) I'd love to write more, I just need to figure out a good next topic.

Re: Lessons learned building an ML trading system

#58

Post by garmaine »

pjc50 wrote: post #43
garmaine wrote: post #33

Earlier quoted context omitted.

Malta is in the EU.

OK, so which EU directive are we dealing with here? Which regulator does Binance answer to?

Their local financial regulator. But the point is EU directives force harmonization of laws governing financial exchanges.

Re: Lessons learned building an ML trading system

#59

Post by garmaine »

baq wrote: post #39
garmaine wrote: post #33

Earlier quoted context omitted.

Malta is in the EU.

This doesn’t guarantee much in itself. A journalist was murdered there for investigating corruption not that long ago.

And the prime minister’s chief of staff was just arrested over that. Just because illegal stuff happens doesn’t mean there aren’t laws against it.

Re: Lessons learned building an ML trading system

#60

Post by criddell »

nickreese wrote: post #11

After having spent an insane amount of time in late 2017/2018 building an HFT bot for Binance I can say this is a pretty solid article. In our case we were doing triangle trading between BTC/ETH/USDT pairs and had our buys/sell delay down to 3-7ms. At one point moving 0.3-0.7% of Binance’s daily volume. Few notes: * Finding an objective point of truth for value when all of the currencies are floating is hard but vita…

What's the value of HFT? If exchanges were required to add a random delay to very trade to work against high frequency traders, would anything of value be lost?
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