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The Day I Lost a Shit-ton of Money, Part I

ptotrading.blogspot.com

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Re: The Day I Lost a Shit-ton of Money, Part I

#41

Post by sillysaurus3 »

foobarian wrote: post #39
throwaway7808 wrote: post #35

Earlier quoted context omitted.

Yes, you are correct. On an average Linux box to have a single cache line data transfer between the cores under 150ns 99% of the time is about the best that you can get. Especially if you are running stock kernel that eats this 1% and creates huge outliers ;). There is some talk though, about crazily-expensive switches with integrated FPGAs...

Light moves at 1 ft per nanosecond... I sure hope you're close to the NASDAQ data center :)

It's 1ft/ns in a vacuum, but my understanding is that it's closer to 0.5ft/ns in a wire, so what you say is doubly true. But I think HFTs are running on servers close to the NASDAQ datacenter, and that people pay buckets of money for such privileges.

Re: The Day I Lost a Shit-ton of Money, Part I

#42

Post by iaw »

throwaway7808 wrote: post #25
consz wrote: post #16

Reading this sort of stuff from manual prop traders makes me laugh. It sounds so amateur hour. How in the world can manual traders ever compete against a short-term stat arb or HFT strategy? It just sounds like pure luck that any of them will make money. Also, is 130k really a huge loss? I run HFT strategies, and while it would definitely be a big loss even for one of my strategies, it wouldn't be a phenomenal outlie…

Now you are just bullshitting. A 130k is a huge loss and a phenomental outlier. You've never had even a 100k loss on your strategies. And by current standards your strategies are not even HFT. I've seen you talking milliseconds. Nowadays people are talking sub-microseconds.

I worked at a prop shop where my teams worst 2-day losses totaled more than $2MM. The worst period for any team on the firm was a $30MM loss with an additional $60MM of risk over the course of 5 days.

No one was happy about it, but it was part of the job and considered reasonable volatility for a portfolio of our (middle) size. While I wasn't a fan of Consz's tone, his numbers check out from my personal experience at a trading firm. Not HFT, but in the end it's all about return on capital and the P&L's should be similar.

Re: The Day I Lost a Shit-ton of Money, Part I

#43

Post by lzhou »

consz wrote: post #16

Reading this sort of stuff from manual prop traders makes me laugh. It sounds so amateur hour. How in the world can manual traders ever compete against a short-term stat arb or HFT strategy? It just sounds like pure luck that any of them will make money. Also, is 130k really a huge loss? I run HFT strategies, and while it would definitely be a big loss even for one of my strategies, it wouldn't be a phenomenal outlie…

I'm not sure that's completely true.

1) Are there places / markets that ST Arb and HFT won't go because it's too illiquid or too idiosyncratically volatile?

2) Are there edges so small that you won't chase?

3) Are there one-off opportunities (2010 flash crash, UST flash crash recently, etc.)?

4) Is there a set of strategies that manual traders know (which they should probably transfer to HFT strategies) that the HFT/ST arb shops don't know?

I think the answer to all of those questions is "yes". They probably take on a lot more risk per trade. They would also be better served by automating their strategies. But I think it's not as cut and dry as you state.

Each individual trader might be "amateur" -- but the firm as a whole might end up with a decent return / risk.

Re: The Day I Lost a Shit-ton of Money, Part I

#44

Post by yummyfajitas »

sillysaurus3 wrote: post #30
throwaway7808 wrote: post #25

Earlier quoted context omitted.

Now you are just bullshitting. A 130k is a huge loss and a phenomental outlier. You've never had even a 100k loss on your strategies. And by current standards your strategies are not even HFT. I've seen you talking milliseconds. Nowadays people are talking sub-microseconds.

Sub-microsecond transactions seem impossible unless you're physically jacked in to the trading datacenter's network. If you try to transfer a message (like a string buffer) as quickly as possible from program A running on core 0 to program B running on core 5 on your server-grade computer, the best benchmarks I could achieve were "99% of measurements executed in fewer than 150 nanoseconds." And I worked hard on this…

The goal is to be faster than the other guy - HFT is a race, thanks to the subpenny rule. So if network latency is 2ms, you still care about making your trades happen in 2,050us vs 2,100us.

Tl;dr even if trades happen in ms, you still care about us.

Re: The Day I Lost a Shit-ton of Money, Part I

#46

Post by theyoungestgun »

throwaway7808 wrote: post #35
sillysaurus3 wrote: post #30

Earlier quoted context omitted.

Sub-microsecond transactions seem impossible unless you're physically jacked in to the trading datacenter's network. If you try to transfer a message (like a string buffer) as quickly as possible from program A running on core 0 to program B running on core 5 on your server-grade computer, the best benchmarks I could achieve were "99% of measurements executed in fewer than 150 nanoseconds." And I worked hard on this…

Yes, you are correct. On an average Linux box to have a single cache line data transfer between the cores under 150ns 99% of the time is about the best that you can get. Especially if you are running stock kernel that eats this 1% and creates huge outliers ;). There is some talk though, about crazily-expensive switches with integrated FPGAs...

These switches aren't really a secret.

And the crazy expensive switch is guaranteed to be the cheap part. Now add the all the ip required to make that fpga smart enough to place orders, and you're talking huge bills in dev hours and third party licensing.

Re: The Day I Lost a Shit-ton of Money, Part I

#47

Post by mathgenius »

I work in a small prop-shop doing HFT. Most of the guys there are manual traders, and I've seen the same guys there for several years making steady money. I don't think this is bs or amateur hour, let me explain why. It is essentially the small (independent) traders that can make a win when the big guys (hedge funds, pension funds) are moving their positions around. Imagine a dude on a surfboard enjoying the wake of an oil tanker and you get the idea. Just don't get too close :-)

Re: The Day I Lost a Shit-ton of Money, Part I

#50

Post by dhammack »

lzhou wrote: post #43
consz wrote: post #16

Reading this sort of stuff from manual prop traders makes me laugh. It sounds so amateur hour. How in the world can manual traders ever compete against a short-term stat arb or HFT strategy? It just sounds like pure luck that any of them will make money. Also, is 130k really a huge loss? I run HFT strategies, and while it would definitely be a big loss even for one of my strategies, it wouldn't be a phenomenal outlie…

I'm not sure that's completely true. 1) Are there places / markets that ST Arb and HFT won't go because it's too illiquid or too idiosyncratically volatile? 2) Are there edges so small that you won't chase? 3) Are there one-off opportunities (2010 flash crash, UST flash crash recently, etc.)? 4) Is there a set of strategies that manual traders know (which they should probably transfer to HFT strategies) that the HFT/…

#4 is the only one which I would say does not hold. I'd be very surprised if a firm of manual traders could consistently outperform the market (or beat a Sharpe of 1).
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