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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

#101

Post by phyalow »

collyw wrote: post #99
onetimeusename wrote: post #67

I lost a shit ton of money at the firm where I work right now almost a year ago. I wrote software that began issuing trades outside of where it was expected to and did not stop. In a panic, I forced the server it was running on to terminate its process but trades were still open in the market. They had to be manually closed. I feel sick to my stomach even writing this right now, that hour I was trying to fix the prob…

To me there seems to be a certain sort of karma in this. HFT doesn't really add value to anything in my opinion (cue the arguments that HFT somehow adds real value to our society). Yet HFT creams a profit by shuffling money around very quickly. So if there are sometimes big losses like this from a bug, then it seems to even things out somewhat.

To me there seems to be a certain sort of karma in this.

Momentum prop trading doesn't really add value to anything in my opinion (cue the arguments that momentum prop trading somehow adds real value to our society). Yet some momentum prop trading creams a profit by shuffling money around very quickly. So if there are sometimes big losses like this from a bug, then it seems to even things out somewhat.

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

#102

Post by swah »

jonaldomo wrote: post #89
enoch_r wrote: post #79

Earlier quoted context omitted.

I love this joke, because on the surface it's making fun of economists whose theories blind them to an obvious reality. But how often does anyone actually find a $100 bill on the ground?

My wife found one once on a very windy day in Denver.

Maybe Bill Gates dropped it (http://www.netfunny.com/rhf/jokes/97/Jul/gateswealth.html)

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

#103

Post by porker »

wazoox wrote: post #97

I can't help but think of confidence and the illusion of control: http://www.nytimes.com/2011/10/23/magazine/dont-blink-the-ha... "Mutual funds are run by highly experienced and hard-working professionals who buy and sell stocks to achieve the best possible results for their clients. Nevertheless, the evidence from more than 50 years of research is conclusive: for a large majority of fund managers, the selection of s…

To me this is depressing as my future pension is invested in funds. Given the rest of the comments: how best to invest it for long-term grown above the rate it'd have in a savings account?

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

#104

Post by byEngineer »

phyalow wrote: post #101
collyw wrote: post #99

Earlier quoted context omitted.

To me there seems to be a certain sort of karma in this. HFT doesn't really add value to anything in my opinion (cue the arguments that HFT somehow adds real value to our society). Yet HFT creams a profit by shuffling money around very quickly. So if there are sometimes big losses like this from a bug, then it seems to even things out somewhat.

To me there seems to be a certain sort of karma in this. Momentum prop trading doesn't really add value to anything in my opinion (cue the arguments that momentum prop trading somehow adds real value to our society). Yet some momentum prop trading creams a profit by shuffling money around very quickly. So if there are sometimes big losses like this from a bug, then it seems to even things out somewhat.

The profit to the society is from regular guys like you and me not partaking in the scam anymore. Not spending money on it. Distrusting the game. Long term it makes sense: people will start investing long term based on fudamentals vs wanting to get rich quick on hocus locus TA. Short term trading is losers game. You will always loose against HFT.

So instead of doing that, read the companies fundamentals. Learn about their debt levels. Earnings. Read their books. And only then invest with 1-2 year time horizon minimum.

HFT is valuable to the society as it makes the society understand that treating Markets like casino gambling isn't working.

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

#105

Post by tomp »

collyw wrote: post #99
onetimeusename wrote: post #67

I lost a shit ton of money at the firm where I work right now almost a year ago. I wrote software that began issuing trades outside of where it was expected to and did not stop. In a panic, I forced the server it was running on to terminate its process but trades were still open in the market. They had to be manually closed. I feel sick to my stomach even writing this right now, that hour I was trying to fix the prob…

To me there seems to be a certain sort of karma in this. HFT doesn't really add value to anything in my opinion (cue the arguments that HFT somehow adds real value to our society). Yet HFT creams a profit by shuffling money around very quickly. So if there are sometimes big losses like this from a bug, then it seems to even things out somewhat.

Cue the argument: there are many flavors of HTF trading. Some funds exploit the latency of different trading platforms - I agree they don't add anything to the society. Others offer liquidity - if the bid-offer spread is $1, they will insert bids above the other bids and offers below the rest of offers, making trading less expensive for investors. Yet others specialize in execution - your "dumb" pension fund manager wants to sell $100M of a particular stock, he'll route the order through a HTF broker who knows the "best strategy" to execute the order without affecting the market price too much, so that the fund gets a better price.

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

#106

Post by im2w1l »

porker wrote: post #103
wazoox wrote: post #97

I can't help but think of confidence and the illusion of control: http://www.nytimes.com/2011/10/23/magazine/dont-blink-the-ha... "Mutual funds are run by highly experienced and hard-working professionals who buy and sell stocks to achieve the best possible results for their clients. Nevertheless, the evidence from more than 50 years of research is conclusive: for a large majority of fund managers, the selection of s…

To me this is depressing as my future pension is invested in funds. Given the rest of the comments: how best to invest it for long-term grown above the rate it'd have in a savings account?

Invest directly in stock and bonds. And if that is not available, than invest in low fee funds.

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

#107

Post by tomp »

phyalow wrote: post #101
collyw wrote: post #99

Earlier quoted context omitted.

To me there seems to be a certain sort of karma in this. HFT doesn't really add value to anything in my opinion (cue the arguments that HFT somehow adds real value to our society). Yet HFT creams a profit by shuffling money around very quickly. So if there are sometimes big losses like this from a bug, then it seems to even things out somewhat.

To me there seems to be a certain sort of karma in this. Momentum prop trading doesn't really add value to anything in my opinion (cue the arguments that momentum prop trading somehow adds real value to our society). Yet some momentum prop trading creams a profit by shuffling money around very quickly. So if there are sometimes big losses like this from a bug, then it seems to even things out somewhat.

"Anything of value" is a subjective measurement - you could say that stock markets don't add anything of value, or you could say that they enable more investments, since you're able to liquidate your investment whenever you want.

Trend following, and mean-reversion following (what this article describes) are techniques that counteract the basic human irrational/emotional biases. Ideally, they should prevent bubbles and stop crashes. They make markets more rational.

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

#108

Post by kasey_junk »

im2w1l wrote: post #106
porker wrote: post #103

Earlier quoted context omitted.

To me this is depressing as my future pension is invested in funds. Given the rest of the comments: how best to invest it for long-term grown above the rate it'd have in a savings account?

Invest directly in stock and bonds. And if that is not available, than invest in low fee funds.

"Invest directly in stock and bonds."

That is pretty much the opposite advice you should take from those findings.

In general, investors now have the widest array of low cost, diversified instruments available at any point in history. Most advisors who know what they are talking about, will tell you to take one of these options (a non-managed index fund, a highly diversified etf) and invest in that. Rebalance once a year and don't worry about beating the market.

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

#109

Post by kasey_junk »

tomp wrote: post #105
collyw wrote: post #99

Earlier quoted context omitted.

To me there seems to be a certain sort of karma in this. HFT doesn't really add value to anything in my opinion (cue the arguments that HFT somehow adds real value to our society). Yet HFT creams a profit by shuffling money around very quickly. So if there are sometimes big losses like this from a bug, then it seems to even things out somewhat.

Cue the argument: there are many flavors of HTF trading. Some funds exploit the latency of different trading platforms - I agree they don't add anything to the society. Others offer liquidity - if the bid-offer spread is $1, they will insert bids above the other bids and offers below the rest of offers, making trading less expensive for investors. Yet others specialize in execution - your "dumb" pension fund manager…

"Some funds exploit the latency of different trading platforms - I agree they don't add anything to the society."

Even those are pretty easy to make an argument for. Very specialized firms spend vast sums of money, to make very thin margins, to provide me with a very valuable service. That is, I don't have to venue shop based on pricing oddities, they will arbitrage those away. I can shop purely on fees and features, the things that actually will impact me in the long term.

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

#110

Post by ljf »

wazoox wrote: post #97

I can't help but think of confidence and the illusion of control: http://www.nytimes.com/2011/10/23/magazine/dont-blink-the-ha... "Mutual funds are run by highly experienced and hard-working professionals who buy and sell stocks to achieve the best possible results for their clients. Nevertheless, the evidence from more than 50 years of research is conclusive: for a large majority of fund managers, the selection of s…

To add to that, a friend 'got into being a trader' as a friend of his simply needed a large number of bodies to manage trades.

Of a year the majority would fail, but would would do great - he would then tout all the 'good' traders out as being new super star traders, and use them to get new business. As long as he had a large enough pool he'd be sure to have a few that became multi-year profitable, and now command large fees.

Basically they are able to make it seem like they know what they are doing, when really they are just hiding failure.

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