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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

#51

Post by smrtinsert »

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.

People are downvoting you, but as someone who only worked on a FIX application in a tiny finance shop, microsecond was barely acceptable. The comment rings false with me as well.

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

#52

Post by n72 »

peterkto wrote: post #18
joshu wrote: post #14

Technical analysis doesn't work. Big surprise you lost money. Those guys that you thought were good at it? They lost their shorts at some point too.

I'm wrong all the time and lose money all the time. The big difference here is I let one get away from me instead of keeping it small/manageable like I always do. It was a situation where I could have controlled it and I didn't. I'm still up more than 4x what the final realized loss was in my trading career. I used to think TA was a joke. I was very skeptical before using it. I have never bothered to explain why it w…

Survivorship bias: http://en.wikipedia.org/wiki/Survivorship_bias

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

#53

Post by AndrewKemendo »

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…

They aren't competing against it though, they are riding the same wave. Competition would assume that HFT's or stat arbs are market makers, doing pump and dumps, which is not the case based on HFT reserve holdings - the antithesis of arb.

Is it less efficient? Yes. It is also orders of magnitude easier to get into. You need PhD mathematicians, computer scientists/engineers to build real hardcore HFT systems. The manual stuff takes what, a high speed internet connection as its infrastructure.

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

#54

Post by notastartup »

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…

statistical arbitrage should come with a general surgeon warning. "may cause hair loss, not actually risk free"

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

#56

Post by lmartel »

mynameishere wrote: post #32
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…

It sounds so amateur hour. Amateur hour? The traders could be monkeys, since it's only the salesman who matter. When you bet other people's money, the strategy is fairly simple: Go long (or short). Somebody at another company goes short (or long). One wins, one loses (it's guaranteed) and the winner gets a percentage of the "win". This is why they love volatility so much, as it determines the size of the profits, eve…

Prop stands for "proprietary," it means that they trade their own money.

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

#57

Post by steven2012 »

sillysaurus3 wrote: post #41
foobarian wrote: post #39

Earlier quoted context omitted.

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.

Wire? It's infiniband and other bufferless network protocols over fiber.

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

#58

Post by mentat »

mturmon wrote: post #40
gohrt wrote: post #22

Earlier quoted context omitted.

Yeah, I alo made a fortune in the market except for the money I lost.

I recall seeing a graph of a stock index in which all but the 10 (e.g.) best days within a very long time span (~years) were removed - to mock up a trader who removed his money at a few unlucky times. You ended up losing huge. The lesson was exactly what you're saying -- you also have to count that one huge loss. You can't fence it off as an exception and remove it from the accounting.

Wealthfront posted a graph on that. I called them out on it on Twitter which they didn't appreciate.

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

#59

Post by quink »

notastartup wrote: post #55

Do you think technical analysis works? Look at the mountains, try drawing resistance lines, my god, you are able to predict when the mountain ridges are going to break through right past 9000! Are you Jesus?

Don't forget the magical term 'support'. Or 'Fibonacci levels'. Or 'resistance zones'. If I see another blog post by the brokerage firm I'm with about freaking 'supports' I'm going to hurl. Technical analysis puts everything from astrology through religion on to homeopathy to shame in its bullshittery.

The most entertaining part is when they go on about the support levels between the currencies. "NOK-NZD is about to break the 5.30 support level and this chart indicates that NOK-NZD is going to go up." It just leaves me thinking WTF, how do you go from here to there? I think, more honestly, the actual example I saw was CHF to JPY.

'Butterfly patterns'? You sure you're not reading tea leaves?

That said, I'm sure technical analysis works. Something like 0.5+ε of the time. And, if you find the right sort of TA, if it's just RSI or some MACD crossover with specific sets of parameters x or y for that stock you might beat buy and hold or whatever. 50% of the time, if you're lucky, before commissions.

But I'm not even convinced, nor should anyone with half a brain be, that 365 days is somehow a magical interval over which we should compare in the long term or anything.

Just buy and hold and index fund, people. Or something very managed with a very low level of turnover and low fees, keeping in mind an appropriate diversification period. When to buy? Today, or gradually over the next few months with dollar cost averaging. Holding period? Ideally forever. Simple.

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

#60

Post by jrockway »

I worked at an investment bank writing software for traders like the author. I never quite knew how it worked, but it somehow paid my salary. (It seemed a lot like crazy kids doing whatever they wanted. That might not be far from the truth.)

What I always thought was interesting was that when the traders blew up like this, they became the PMs or support for the software :)

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