Wow, fuck that guy. no really. Should be title "How I stole 500k with machine learning and high frequency trading".
Who did he steal it from?
How I made $500k with machine learning and high frequency trading
141–150 of 320 posts
Re: How I made $500k with machine learning and high frequency trading
#142Earlier quoted context omitted.
This is not even close to an accurate summary. He never stated that he had any employer backing, and he wasn't collecting market making fees. In fact he was paying brokerage fees which is the exact opposite.
He used his own money to test his algos? Come on. Taking a Machine Learning and Statistics course does not make you a trader. You need something else - access to the system. This is why my guess is that he was an employee.
An employee of what? He states above that he was paying roughly $200/month for a server and $1800/month for the software/data connections to his broker.
Re: How I made $500k with machine learning and high frequency trading
#143Earlier quoted context omitted.
Longs and shorts were 50/50 and my program showed no preference for up or down days. High volatility and high volume was what it liked.
I guess the real question is: what was your alpha in that timeframe?
I'm probably showing my ignorance here but what do you mean by alpha? And how is it quantified?
Re: How I made $500k with machine learning and high frequency trading
#144If 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?
1.)Getting a server close to the exchange
2.)Finding a good predictor. Predicting up or down is easy on paper. Finding a predictor that a.)beats the spread, b.)factors in lag time to execution, and c.)factors in commission, is hard.
3.)Market regime changes. What works a few months ago isn't guaranteed to work now.
Re: How I made $500k with machine learning and high frequency trading
#145This reminds me of an AMA from a few years ago. Really interesting if you are into stuff like this: http://www.reddit.com/r/IAmA/comments/9s9d7/iama_100_automat...
thanks for posting hadn't seen that
Re: How I made $500k with machine learning and high frequency trading
#146The high point of my trading was October 2009 when I made almost 100k. After this I continued to spend the next four months trying to improve my program despite decreased profit each month. Unfortunately by this point I guess I’d implemented all my best ideas because nothing I tried seemed to help much.
It is of course possible that once you made "real" money with your algorithm it was spotted by the other algorithms which then started working against it. (Aka exploiting it) Having talked with people in that space (hft) I was left with the impression that an insane amount of analysis was done on those trades.
Re: How I made $500k with machine learning and high frequency trading
#147It is pretty clear from his own graph that this stopped working in october '10. which was an eternity ago in terms of financial markets. algorithmic trading has increased manifold since then, so finding another arbitrage opportunity like he did is only going to be more difficult.
Re: How I made $500k with machine learning and high frequency trading
#148This 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 could have easily been called "how i lost 500k with machine learning". If you've really worked in that field than it's very surprising you've never heard about what professional poker players call bankroll management (and they "stole" the concept from professional traders). The whole point is that you can --either if you gain an edge or get lucky-- win big. Very big. But you're never exposing a large part of your…
Well put.
Risk management is probably the single most important thing to understand in trading. Unfortunately, it's something that lots of people learn late, if ever.
Folks get caught up in the romantic notion of betting it all and winning big, but end up losers. Meanwhile, the consistent winners they aspire to be are exposing perhaps 0.2% of their roll at a time.
Re: How I made $500k with machine learning and high frequency trading
#149I started the infrastructure for this kind of thing a while ago. It's BSD licensed.
It is a software implementation of the Viable System Model (VSM), a model for autonomous systems developed by Stafford Beer. It provides structure, communications, auditing and alerting for autonomous systems.
Part of it is base code for dealing with stocks and options, treating securities positions as autonomous systems that have the scaffolding for running simulations on themselves. It's in Smalltalk and runs under Squeak and Pharo. It can be found at:
http://home.rbcarleton.com/rbc/software/smalltalk/VSA/
I won't try to advertise it as a complete solution, but it might be the start of one.
Re: How I made $500k with machine learning and high frequency trading
#150Don't do this with your own money. Found a startup building HFT tools, and then raise money for it, and use other people's money to test your tools.
If the tools work, sell them. If they don't, tweak them, try it again, and sell them until they do.
This is risk management.