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How I made $500k with machine learning and high frequency trading

jspauld.com

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Re: How I made $500k with machine learning and high frequency trading

#31

Post by marshallp »

tarr11 wrote: post #23

This is just glorified gambling. I am not sure what special insight or advantage he had, other than his own model. Every trader has a model. It could have easily been called "how i lost 500k with machine learning". Like gambling, it's easy to manipulate statistics to show that you did well in some period of time. I worked for a large investment bank about 10 years ago, writing trading programs for quant traders who w…

I don't get that. It would be true if he just made a few trades, but the author claimed to be making 2000 trades a day. Over a period of months winning that wouldn't qualify as blind luck.

Re: How I made $500k with machine learning and high frequency trading

#32

Post by kami8845 »

jspaulding wrote: post #21
dude_abides wrote: post #8

Earlier quoted context omitted.

Thanks for the post. Is this the software you used? http://www.ctsfutures.com/t4.aspx Would be even more awesome if you could share some code on github.

Yes, however, I forgot to mention that pretty early on I converted my program to use an API from https://www.tradingtechnologies.com . It's odd, but I can't remember exactly why. I think it was simply because I found a broker who could offer me a lower commission rate and they only supported TT. With regard to posting code yes I may do that. We'll see.

>With regard to posting code yes I may do that. We'll see.

What does it depend on?

Re: How I made $500k with machine learning and high frequency trading

#33

Post by jetti »

jcromartie wrote: post #6
jspaulding wrote: post #2

If anyone has questions for me happy to answer as best I can.

I have one question: Why doesn't every hacker do this to make extra money? Is it within the grasp of anybody who can program to automate trading like this? EDIT: Sounds like it's not really for everybody. You have to own or rent a server with access to direct lines to the exchanges, or else your lag will be such that profiting from HFT is impossible. How much do these cost?

"Why doesn't every hacker do this to make extra money? Is it within the grasp of anybody who can program to automate trading like this?"

I have flirted with HFT in a hobby-like manner and it isn't the programming that will get you the money, it is the domain specific knowledge coupled with the programming. On top of that, there are quite a few risks and potential to lose a lot of money.

Re: How I made $500k with machine learning and high frequency trading

#35

Post by mgl »

tarr11 wrote: post #23

This is just glorified gambling. I am not sure what special insight or advantage he had, other than his own model. Every trader has a model. It could have easily been called "how i lost 500k with machine learning". Like gambling, it's easy to manipulate statistics to show that you did well in some period of time. I worked for a large investment bank about 10 years ago, writing trading programs for quant traders who w…

It's more a risk management game, not particularly gambling, just look at EUR/AUD: http://stooq.com/q/?s=euraud&c=3y&t=l&a=ln&b...

Would you dare to "predict" the direction of this FX rate movement in the next month? Then it's a matter of calculating potential profit/loss factor and adjusting your trade value. And yes, as with any high risk investment, putting all your eggs in one bucket is not a brilliant idea. Just like taking all your savings to Vegas.

Re: How I made $500k with machine learning and high frequency trading

#38

Post by washedup »

tarr11 wrote: post #23

This is just glorified gambling. I am not sure what special insight or advantage he had, other than his own model. Every trader has a model. It could have easily been called "how i lost 500k with machine learning". Like gambling, it's easy to manipulate statistics to show that you did well in some period of time. I worked for a large investment bank about 10 years ago, writing trading programs for quant traders who w…

I disagree. The point of the article was the show the steps required to develop a statistical advantage in the market place. If you develop a robust model and are very diligent in how it executes and learns, you can be successful. However, what you say about market structure is true. It goes through periods of stability, followed by abrupt changes. Any model that a trader has developed has been developed on such a short time-scale of market activity, that it can turn out to be a bad sample size. Depends on the scale of time and trades.

Re: How I made $500k with machine learning and high frequency trading

#39

Post by jspaulding »

tarr11 wrote: post #23

This is just glorified gambling. I am not sure what special insight or advantage he had, other than his own model. Every trader has a model. It could have easily been called "how i lost 500k with machine learning". Like gambling, it's easy to manipulate statistics to show that you did well in some period of time. I worked for a large investment bank about 10 years ago, writing trading programs for quant traders who w…

I tried to address this concern at the start of my post. If you have some idea of how I manipulated the statistics I'd be happy to respond.

Having said that I can agree that my case is pretty unusual and that everyone should beware of attempting to do something like this. Even for myself I couldn't do it now. (There is a reason I turned my program off.)

Re: How I made $500k with machine learning and high frequency trading

#40

Post by beagle3 »

tomp wrote: post #34

This article is missing a crucial piece of data: what was the initial investment.. earning 500k with 10k initial investment is genious, with 10M initial investment it's just another year on the stock market.

This is a different style of trading than what investors do. He said that he was never more than a few contracts in. A single contract needs $10K day trading margin usually (depends on time frame and specific contract, but it's a reasonable estimate). Therefore, if he was never more than 10 contracts long or short at the same time, the risk was of $100K.

Making $500K on $100K over 6 months is good business.

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