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How I made $500k with machine learning and high frequency trading
111–120 of 320 posts
Re: How I made $500k with machine learning and high frequency trading
#112I could do the same with poker. Or I could lose it all. That variance thing is a bitch.
Re: How I made $500k with machine learning and high frequency trading
#113Earlier quoted context omitted.
>With regard to posting code yes I may do that. We'll see. What does it depend on?
If I was correct in guessing that he used XTAPI (via X_TRADER Pro), IIRC that costs around $1k/mo depending on who you go through for the front end license. I was only a developer so I'm not sure what licensing costs are for gateways, but those are the servers you connect to in order to place orders on the exchanges. He was trading the Russel on ICE, and DAX on Xetra (maybe Eurex?), so he would have needed two gatewa…
My fixed costs were $2000/month. I think it was $1800 for TT plus $200 server rent so damn.. I was getting overcharged $800!! oh well :)
Re: How I made $500k with machine learning and high frequency trading
#114Earlier quoted context omitted.
This is a bit off-topic, but it's actually quite feasible to get a real edge in Hold'em, and it's not just about spotting other people's patterns. To start with, there's simple probability: knowing the odds of making you hand vs. the payoff in the pot, or the chance of winning with various starting hands. This is pretty basic but a lot of low-stakes players screw it up. If you get it right, their mistakes are your ga…
Thanks for posting this so I didn't have too. Poker is "a game of skill with an element of luck" and should not be confused with say, gambling on roulette or the outcome of a coin toss.
The same could be said of HFT. Traders are "skilled" at having nanosecond access to the orderbook, having their servers co-located in the same rack space as the exchange itself. They are also "skilled" at recognizing a price movement nanoseconds before it actually happens and getting their order in just in time.
But the HFT game changes and you have to keep up. Just as a poker player from 10 years ago would not survive in the game today without adapting his style of play.
Re: How I made $500k with machine learning and high frequency trading
#115Earlier quoted context omitted.
>With regard to posting code yes I may do that. We'll see. What does it depend on?
If I was correct in guessing that he used XTAPI (via X_TRADER Pro), IIRC that costs around $1k/mo depending on who you go through for the front end license. I was only a developer so I'm not sure what licensing costs are for gateways, but those are the servers you connect to in order to place orders on the exchanges. He was trading the Russel on ICE, and DAX on Xetra (maybe Eurex?), so he would have needed two gatewa…
My fixed costs were $2000/month. I think it was $1800 for TT plus $200 server rent so damn.. I was getting overcharged $800!! oh well :)
Re: How I made $500k with machine learning and high frequency trading
#116Earlier quoted context omitted.
It is only gambling in the sense that any business is gambling: Your customers might stop coming tomorrow because the fad wore off, or a competitor provides a better/cheaper/hipper alternative. (And indeed, living is gambling. It's all just a matter of the risk/reward portfolie). But jspauld has apparently made $2/trade after fees on 250,000 trading, with a very small standard deviation (I would guess less than $2/tr…
Exactly. I've played millions (!) of real-money online poker hands and won some money in the process (not anywhere near what most people who've played that many hands did). Most people don't understand that, when you're able to recognize patterns, playing millions of hands while never exposing more than 1% of your bankroll on any deal is not "gambling" but "printing money" (a tiny amount of money in my case compared…
I think the real problem (as with so many problems) is definitional. What does "gambling" actually mean?
If I tried to kludge together a definition, I might come up with something like:
>Risking the loss of something of value in exchange for the possibility of gaining something of greater value in a situation where the determining factor of losing value or gaining value is random chance
The problem with a definition like this is that, as others have pointed out, it applies to vast realms of human endeavor, from founding a company to playing the lottery. It also includes no distinction between risks with a positive expected value and risks with a negative expected value.
If a lottery has ten $1 tickets for sale and each ticket has an equal chance of winning, there is an obvious difference between the prize being $11 and $9, but buying a ticket at either price is just as much "gambling" in the common parlance.
What we really need is a word that only refers to gambling in situations with an expected value less than or equal to zero.
Re: How I made $500k with machine learning and high frequency trading
#117Earlier quoted context omitted.
This. I love crazy projects and Show HN's until the cows come home, but this one is dangerous that I must repeat the warning to others. I cannot emphasize how important it is to understand that people who trade using price action ( http://en.wikipedia.org/wiki/Price_action_trading ) are just speculating based on where they expect the price to move. It's no different than people who play Texas Hold'em online and specu…
Hey, I didn't actually intend this to be a course. I do not make any money in the market right now so am certainly not qualified to teach a course on it. And of course, if I was making money in the market I wouldn't have posted this at all. So please everyone remember that. These comments have made me realize it's probably for the best if I do not post the source code. Basically you are competing against armies of PH…
Thank you for posting this. Very interesting to read.
Perhaps posting the source code would not be a good idea, but posting more details would be welcome so that people interested could follow their own path to automated trading.
Re: How I made $500k with machine learning and high frequency trading
#118I don't have much experience with finance or working experience with machine learning, but I've always wondered how much room there was for a clever amateur to profit in this space, even as it's crowded with much more sophisticated professionals with much more sophisticated algorithms and machines. I'm thinking back to Garry Kasparov's piece in the NY Book Review a couple years back: http://www.nybooks.com/articles/a…
Good point, I also wonder about the potential to exploit the algorithms used by the "professionals." In other words, if you can come up with a reasonable approximation of what the pros will do, can you use that information to beat them?
Re: How I made $500k with machine learning and high frequency trading
#119Earlier quoted context omitted.
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?
> 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. A profitable predictor is a much, much harder problem. At a place like Goldman Sachs, a quant with a working predictor gets paid 5 times as much as the IT guy who makes that predictor talk to the market quickly enough. Because, as your question implies, it is (relativel…
At a place like Goldman Sachs, you don't need quants or predictors. You call up the CEO of a company you want to post record profits, and you tell them if they don't do absolutely desperate, self-destructive things (screwing employees and customers for immediate gains), you will crash their stock and destroy their entire company. That CEO then has a choice. Be the one who killed the company, or be the one who kept it running for a few more weeks and delivered a record quarter that made Goldman Sachs happy.
Once you have the assets and capacity to actively manipulate the price of any stock at will, the market is a VERY different animal and no longer need to be understood at all. You simply force its hand.
Re: How I made $500k with machine learning and high frequency trading
#120Earlier quoted context omitted.
The Instagram guys found an edge. It won them 730m. Fantastic. More than any edge ever won by me. But the market has changed so much since then, please be careful before you follow this course. You are not wrong, but what you wrote here is applicable to any success story posted on HN. Caveat lector. Always.
I think with the automated trading example, it makes it seem much easier for anyone to dip their cup in the stream. When you think Facebook/Instagram, you think "Damn, those guys got lucky as hell". When you think automated trading, you think, "Hey, it can't be that hard", and start firing up your IDE and rolling out code to talk to an easily provisioned API. Sure, it may take months to lose your shirt selling a phot…
> "The market can stay irrational longer than you can stay solvent."
As long as we're quoting Keynes, let's also remember this gem from a letter he wrote to the regents of King's College about the performance of their endowment's portfolio (which Keynes managed).
"The management of stock exchange investments of any kind is a low pursuit, having very little social value and partaking (at its best) of the nature of a game of skill, from which it is a good thing for most members of our Society to be free; whereas the justification of Worlaby and Elsham lies in its being a constructive and socially beneficial enterprise, where we exercise a genuine entrepreneurial function, in which many of our body can be reasonably and usefully interested. I welcome the fact that the Estates Committee-to judge from their poker faces and imperturbable demeanour-do not take either gains or losses from the Stock Exchange too gravely-they are much more depressed or elated (as the case may be) by farming results. But it may be useful and wise nevertheless, to analyse from time to time what is being done and the principles of our policy."
Edit: Worlaby and Elsham was a farm that the endowment owned.