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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

#311

Post by raverbashing »

beagle3 wrote: post #287
raverbashing wrote: post #272

Earlier quoted context omitted.

"You can lose everything overnight with automated trading." Didn't your father teach you about "Stop orders" You can't have your algorithm cranking away without supervision. And to be extra sure, lots of testing and LIMITS. Limit the amount and value of orders. With stocks, worst case: you lose the face value of stocks in your portfolio Derivatives: you can lose more, even 'infinite liability' (still, it's constraine…

Stop orders don't guarantee execution or any specific limit to the loss; During a flash crash, you'll realize that a "10% stop loss" order CAN become a 50% loss.

I don't disagree with you, still, 50% losses are not 100% losses (or even more than 100% losses)

So I guess they have a role in limiting losses (which had they not been there would be much bigger)

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

#312

Post by mikeash »

lotu wrote: post #308
mikeash wrote: post #57

Earlier quoted context omitted.

You don't need a bias to accidentally make money when the market is overall moving up, do you? Picking stocks by throwing darts while blindfolded will, on average, make you money in a market that's moving up.

The problem is he was also selling short. If you pick stocks randomly and randomly pick to buy or sell you shouldn't make money, ever.

You're right, if you're randomly and without bias including short selling then you'd expect to neither make nor lose money, aside from transaction fees.

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

#313

Post by jspaulding »

gubatron wrote: post #232

of course no firm would respond to his noob low yield model. The level of the coders doing HFT is beyond the comprehension of this guy, added to the team of Mathematicians, Physicists and computer scientists at your average HFT firm, they probably laugh when they read this. Good try though, it was awesome that eventually he tuned it to profitability, but there's no way in hell they'd buy that amateur software/algorit…

This is such an odd comment. What motivates you to write such a comment? And what makes my system amateur and noob in your eyes?

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

#314

Post by jspaulding »

curationary wrote: post #291

how is it "machine learning"? A few if-else doesn't make it "machine learning", or does it? - @curationary

It takes data (last 4 weeks of market update data) and learns how to predict price movements and how to make profitable trades.

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

#315

Post by bshanks »

gweinberg wrote: post #176
beagle3 wrote: post #48

Earlier 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…

No. Every business has a risk element, but what makes this gambling is that there is no good or service being produced. It's a game of trying to outguess the other players, with one trader's gain being another trader's loss (relative to market returns). Because there's a commission on trades, and because you pay taxes on net gains but your minimum tax is zero, high frequency trading by its very nature must a loss for…

So consider an insurance company. This company is engaging in transactions (providing insurance) in which one party will make $X and the other will lose an equal amount of dollars. Would you say that this company is providing no service?

It sounds like you are making the argument that this is zero-sum game, but whether something is zero-sum depends on your utility function. If the players are risk averse, then a transaction like buying insurance can yield positive utility for both participants.

Many trading strategies are performing a service in similar (but more complicated) ways.

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

#316

Post by Kranar »

beagle3 wrote: post #92
toomuchtodo wrote: post #59

Earlier quoted context omitted.

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…

> You can lose everything overnight with automated trading. I'll take it ad absurdum: You can lose everything in a second by not looking left and right while crossing the road. Or even by looking left and right while crossing the road, when someone else is driving recklessly. It is possible to attempt HFT with not much more risk than stating a new InstaFaceGoogApple service. Put $10,000 in your margin account, and us…

No broker is offering the ability to engage in HFT for 10 grand.

In order to open an account with the neccessary infrastructure to engage in HFT one must be an accredited investor (typically means having a net worth of 1 million dollars or more) and the cheapest brokers typically require a minimum deposit of $500,000.

Not to mention the overall costs including hardware, co-location, market data and other vendor costs are on the order of 45-50k a month.

With $10,000 you can't even open up a normal day trading account as the law required a minimum deposit of 25k.

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

#317

Post by frankster »

photorized wrote: post #229

I am skeptical for two reasons: 1. when you have a good system (even one you cannot "improve" further), you don't talk about it. 2. You don't just stop using it. There should be more to this story.

Can I recommend that you read the article and you will find therein the answers you seek!

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

#318

Post by toomuchtodo »

Kranar wrote: post #316
beagle3 wrote: post #92

Earlier quoted context omitted.

> You can lose everything overnight with automated trading. I'll take it ad absurdum: You can lose everything in a second by not looking left and right while crossing the road. Or even by looking left and right while crossing the road, when someone else is driving recklessly. It is possible to attempt HFT with not much more risk than stating a new InstaFaceGoogApple service. Put $10,000 in your margin account, and us…

No broker is offering the ability to engage in HFT for 10 grand. In order to open an account with the neccessary infrastructure to engage in HFT one must be an accredited investor (typically means having a net worth of 1 million dollars or more) and the cheapest brokers typically require a minimum deposit of $500,000. Not to mention the overall costs including hardware, co-location, market data and other vendor costs…

Not true. I have a commodities trading account I use to trade corn, soybeans, and hogs. Minimum opening balance was $5K (Tradestation). Scottrade and others have a minimum of $500. Now if you're talking margin accounts, sure, you're going to need more.
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