The future of automated trading: round two - page 3
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Timbo's basic message is: Robots have completely and unconditionally won the competition in the market. To win, a trader must have their own data centre, a gigabit channel with no commissions and a robot that would fight for every pip. We, the small and poor, cannot afford all that, so there is nothing to think about when it comes to making money on the exchange.
There is an important aspect that has been forgotten - disadvantages are extensions of our strengths and vice versa. Do you think that large funds monitor and try to trade a huge number of instruments out of the good life. Imagine that you have a million dollars - how would the operation of your trading system change, what changes need to be made in it? Now imagine that you have a billion in your fund - the problems become even greater.
That's why they have to try to earn bit by bit everywhere, because nobody will let them earn much. They have to diversify speculation by sector, market, country and so on. You cannot scalp huge trading volumes, you have to take a little by little. This is where you need mathematical models, powerful data centres to process them, and to place your servers directly on the exchange - all these are additional overheads. And all that in order to outbid for a fraction of a second a poor guy with big money (if we are talking about intraday trading).
There is an important aspect that has been forgotten - disadvantages are extensions of our strengths and vice versa. Do you think that large funds monitor and try to trade on a huge number of instruments out of the good life. Imagine that you have a million dollars - how would the operation of your trading system change, what changes need to be made in it? Now imagine that you have a billion in your fund - the problems become even greater.
That's why they have to try to earn bit by bit everywhere, because nobody will let them earn much. They have to diversify speculation by sector, market, country and so on. You cannot scalp huge trading volumes, you have to take a little by little. This is where you need mathematical models, powerful data centres to process them, and to place your servers directly on the exchange - all these are additional overheads. And all that in order to outbid for a fraction of a second a poor guy with big money (if we are talking about intraday trading).
There is an important aspect that has been forgotten - disadvantages are extensions of our strengths and vice versa. Do you think that large funds monitor and try to trade a huge number of instruments out of the good life. Imagine that you have a million dollars - how would the operation of your trading system change, what changes need to be made in it? Now imagine that you have a billion in your fund - the problems become even greater.
That's why they have to try to earn bit by bit everywhere, because nobody will let them earn much. They have to diversify speculation by sector, market, country and so on. You cannot scalp huge trading volumes, you have to take a little by little. This is where you need mathematical models, powerful data centres to process them, and to place your servers directly on the exchange - all these are additional overheads. And all that in order to outbid for a fraction of a second a poor guy with big money (if we are talking about intraday trading).
The last thing they need is hobbits.
You shouldn't do that. You don't know me and you're humiliating me.
You shouldn't do that. You don't know me and you're humiliating me.
Well, he's exaggerating, just for show. Apparently for him autotrading is pipsing. You can successfully trade on hourly and daily timeframes, as the results of previous competitions have shown. You have correctly noted it in your previous post. Besides, I somehow do not believe that Goldman Sachs makes its major profit by pipsing.
The future is not in bar handling. I've seen the phrase "make robust systems. Work on hourly candlesticks". Yeah, you can do it on the hour candlesticks, but that's not where the future is...
We often mention mathematicians here. So there is a theory of OC (optimum control) and its modification STOU (statistical theory of OC). And the formula for optimum control has been obtained, and this is a fundamental work. And it makes no difference what is controlled, a spaceship, an aeroplane, a car or your trading account. Here you can look at http://ru.wikipedia.org/wiki/Оптимальное_управление if you're interested.
Read more about this criterion http://abitur.bsuir.by/eumk/smssu/lecture/theme_4.html
I can assure you that if you can solve the problem of managing your account in this formulation, no one will be cooler than you... mathematicians have proven, no one is cooler.
According to this theory you have to constantly control the object and be able to control it at any time. You can't do it without it...
So if you work on hourly candlesticks, you are breaking this rule. In other words, you are driving a car whose steering wheel can only be touched once an hour. Not before or after. How many of you would get in a car like that? What if there's a bend? A cliff ? then only the ejection system, the analogue in the stop loss trade, saves the day.
Any ATC must have market entry rules and market exit rules. And if your trading system did not have time to track the turn, triggered a stop loss, (you ejected), that's it - stop trading and re-checking, which would exclude this situation in the future.
Z.U. Constant flying into a ditch, has never done anyone any good. Do not enter into such calls, this is amateurish approach and it has no future. Only tics. Only a permanent control and the ability to manage positions. And pipsing has absolutely nothing to do with it... You can calculate a profit by 200 bars and by 200 ticks, it will remain the same as a profit... but in the first case, you always fly into a ditch, and in the second case, you have a chance to manage to turn ...
The future is not in bar handling. I've seen the phrase "make robust systems. Work on hourly candlesticks". Yeah, you can do it on the hour markers, but that's not where the future is...
We often mention mathematicians here. So there is a theory of OE (optimal control) and its modification STOU (statistical theory of OE). And the formula for optimal control has been obtained, and this is a fundamental work. And it makes no difference what is controlled, a spaceship, an aeroplane, a car or your trading account. So if you're interested you can take a look athttp://ru.wikipedia.org/wiki/Оптимальное_управление
Read more about this criterion http://abitur.bsuir.by/eumk/smssu/lecture/theme_4.html
I can assure you that if you can solve the problem of managing your account in this formulation, no one will be cooler than you... mathematicians have proven, no one is cooler.
According to this theory you have to constantly control the object and be able to control it at any time. You can't do it without it...
So if you work on hourly candlesticks, you are breaking this rule. In other words, you are driving a car whose steering wheel can only be touched once an hour. Not before or after. How many of you would get in a car like that? What if there's a bend? A cliff ? then only the ejection system, the analogue in the stop loss trade, saves the day.
Any ATC must have market entry rules and market exit rules. And if your trading system did not have time to track the turn, triggered a stop loss, (you ejected), that's it - stop trading and re-checking, which would exclude this situation in the future.
Z.U. Constant flying into a ditch, has never done anyone any good. Do not enter into such calls, this is amateurish approach and it has no future. Only tics. Only a permanent control and the ability to manage positions. And pipsing has absolutely nothing to do with it... You can calculate a profit by 200 bars and by 200 ticks, it will stay as a profit... but in the first case, you always fly into a ditch, and in the second case, there is a chance to do a turn...
Although the analogy with driving a car is interesting, I don't think it is entirely accurate. The question is: What is "flying into a ditch"? When trading on tick data, it is a loss of a few pips, say 5-10 pips. When trading using daily data - a loss of 50-100 pips. Everything should be commensurate with the value of the average profit. Here is my analogy. The movement of planets can be calculated at a quantum level with an error in picometer, and you can calculate at macro level by Newton's laws, with an error of hundreds of kilometres (the same "flying into the ditch"). The question is - which method is more accurate? We can easily answer - the first one. But if you are interested in two planets moving in hours or days, why bother with Schrödinger equations for each particle of the solar system, if you receive a satisfactory answer by the laws of classical mechanics?