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Lessons learned building an ML trading system

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Re: Lessons learned building an ML trading system

#21

Post by jrockway »

cco wrote: post #9

And in the end, what value was created? "Liquidity in the BTC market"?

I feel like commercial activity finds value and removes it from the system.

To create value, you need to give someone else money. If I wanted to build a better society, I'd make sure everyone had the best possible education. Paying for this would bankrupt me, maybe even bankrupt the entire country. But with every single person in the country walking around with a deep understanding of music, art, mathematics, engineering, and science... as a society, I'm sure we'd do great things. Value would be created in the very long term, but not for me, the potential investor.

Then on the other hand, we have things like automated trading. That boils down to asking a bunch of people "will you pay $5 for this $4 bitcoin?" Anyone that says "sure!" just gave you a dollar. Do that millions of times per second, and you remove as much value from the system as possible.

Re: Lessons learned building an ML trading system

#22

Post by andruby »

kami8845 wrote: post #16
nickreese wrote: post #11

After having spent an insane amount of time in late 2017/2018 building an HFT bot for Binance I can say this is a pretty solid article. In our case we were doing triangle trading between BTC/ETH/USDT pairs and had our buys/sell delay down to 3-7ms. At one point moving 0.3-0.7% of Binance’s daily volume. Few notes: * Finding an objective point of truth for value when all of the currencies are floating is hard but vita…

Thanks for sharing. Do you think building the strategy on another exchange such as Coinbase Pro or pursuing a strategy that wasn't as latency-sensitive might've yielded more success?

I ran a triangle trading arbitrage bot on Coinbase that was profitable at the end of 2017. But a few weeks later, it was losing money on hard to diagnose slippage. The number of “opportunities” also collapsed, which indicates that other bots were doing the same or that coinbase was doing this internally.

I pulled the plug. Tried to run it on Binance but the websocket only updated once a second, so there was way too much risk.

Re: Lessons learned building an ML trading system

#23

Post by jtx22 »

nov272019 wrote: post #13
carlsborg wrote: post #12

Earlier quoted context omitted.

Why did you have to pay back trading profits with interest? Do you mean taxes on trading profits with interest*? Which country?

Yes, taxes on the profit with interest applied. Finland. Extra warning: ensure your country allows individual cryptocurrency investors to reduct losses from winnings. Without such law, if you win 100 dollars and then lose 100 dollars, you would still owe the government taxes while you are at 0. This is the case in surprisingly many countries.

You should have run this operation out of Dubai or a similar haven.

Re: Lessons learned building an ML trading system

#24

Post by tardis_thad »

nickreese wrote: post #11

After having spent an insane amount of time in late 2017/2018 building an HFT bot for Binance I can say this is a pretty solid article. In our case we were doing triangle trading between BTC/ETH/USDT pairs and had our buys/sell delay down to 3-7ms. At one point moving 0.3-0.7% of Binance’s daily volume. Few notes: * Finding an objective point of truth for value when all of the currencies are floating is hard but vita…

Really interesting, thanks! Could you share bit more about the 'institutional access' call? Does it mean that selected few have access to real-time book updates and all the rest is @100ms delayed? So much of level playing field :) Is it common for asian crypto exchanges?

Re: Lessons learned building an ML trading system

#25

Post by rixrax »

nickreese wrote: post #11

After having spent an insane amount of time in late 2017/2018 building an HFT bot for Binance I can say this is a pretty solid article. In our case we were doing triangle trading between BTC/ETH/USDT pairs and had our buys/sell delay down to 3-7ms. At one point moving 0.3-0.7% of Binance’s daily volume. Few notes: * Finding an objective point of truth for value when all of the currencies are floating is hard but vita…

When You do this kind of (HFT) trading, how does ones tax returns look like? E.g. I assume you still have to report every trade with its gain/loss to a tax authority?

Re: Lessons learned building an ML trading system

#26

Post by pjc50 »

nickreese wrote: post #11

After having spent an insane amount of time in late 2017/2018 building an HFT bot for Binance I can say this is a pretty solid article. In our case we were doing triangle trading between BTC/ETH/USDT pairs and had our buys/sell delay down to 3-7ms. At one point moving 0.3-0.7% of Binance’s daily volume. Few notes: * Finding an objective point of truth for value when all of the currencies are floating is hard but vita…

> It was in that moment we realized playing in unregulated markets is not fun or something we wanted to continue to do. Intermediary risk was something we didn’t account for.

Indeed. This is the really difficult thing about the crypto space: winnings, if you can keep them. And you can't if the house is just going to front-run all your orders.

Re: Lessons learned building an ML trading system

#27

Post by pjc50 »

carlsborg wrote: post #18
nickreese wrote: post #11

After having spent an insane amount of time in late 2017/2018 building an HFT bot for Binance I can say this is a pretty solid article. In our case we were doing triangle trading between BTC/ETH/USDT pairs and had our buys/sell delay down to 3-7ms. At one point moving 0.3-0.7% of Binance’s daily volume. Few notes: * Finding an objective point of truth for value when all of the currencies are floating is hard but vita…

> the orderbooks were slightly different between bots That sounds like a big deal. If this is repeatable, you should document it better. Unregulated doesn't mean a license to do blatantly illegal things. Crypto exchanges certainly get taken to court. Sure it wasnt your book building algo and a snapshot retrieval race?

Binance is in Malta, a somewhat corrupt tax haven; are you sure it's illegal there?

Re: Lessons learned building an ML trading system

#28

Post by smabie »

echelon wrote: post #20

Can this same strategy be leveraged on zero-fee stock exchanges? Why is crypto the target here?

Crypto is a relatively inefficient market. Equity markets are too efficient: there are too many smart players and alpha is very hard to find. Crypto is a little easier, though that is changing fast.

Re: Lessons learned building an ML trading system

#29

Post by TuringNYC »

rixrax wrote: post #25
nickreese wrote: post #11

After having spent an insane amount of time in late 2017/2018 building an HFT bot for Binance I can say this is a pretty solid article. In our case we were doing triangle trading between BTC/ETH/USDT pairs and had our buys/sell delay down to 3-7ms. At one point moving 0.3-0.7% of Binance’s daily volume. Few notes: * Finding an objective point of truth for value when all of the currencies are floating is hard but vita…

When You do this kind of (HFT) trading, how does ones tax returns look like? E.g. I assume you still have to report every trade with its gain/loss to a tax authority?

IANAA, but you file a gigantic "Schedule-D". I have never done it with crypto, but there is standard software to do it for non crypto stuff.

I used GainsKeeper: http://www.wolterskluwerfs.com/tax-reporting/solutions/gains...

I see they do crypto, but I've never used it for that.

For companies, they have entire departments that consolidate trades and construct massive Schedule Ds

Re: Lessons learned building an ML trading system

#30

Post by Twirrim »

nov272019 wrote: post #13
carlsborg wrote: post #12

Earlier quoted context omitted.

Why did you have to pay back trading profits with interest? Do you mean taxes on trading profits with interest*? Which country?

Yes, taxes on the profit with interest applied. Finland. Extra warning: ensure your country allows individual cryptocurrency investors to reduct losses from winnings. Without such law, if you win 100 dollars and then lose 100 dollars, you would still owe the government taxes while you are at 0. This is the case in surprisingly many countries.

There was a "fun" post on reddit with someone that made a fortune out of bitcoins a few years ago when there was that big surge, who then managed to lose it all via some poorly thought out cryptocurrency trading. He'd found himself with an enormous capital gains tax bill he couldn't pay off. It hadn't occurred to him at all that the profits on bitcoin trading would be taxable.
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