Andre (Jun 23, 2004 4:31:09 PM)
Today we're pleased to welcome Serge Pustelnik of Genesis Securities to the Elite Trader Chat Room.
Andre (Jun 23, 2004 4:31:22 PM)
Serge was a successful NASDAQ trader for several years. He's mentored many profitable traders and designed unique scalping and arbitrage systems. He is currently working on several complex computer-trading systems.
Andre (Jun 23, 2004 4:31:28 PM)
At Genesis Securities, Serge Pustelnik is in charge of business development. He works together with talented traders and software developers to build powerful tools in Genesis' Laser Platform to increase trader performance.
Andre (Jun 23, 2004 4:31:46 PM)
So let's get to it, welcome, Serge... thanks for joining us today.
Serge Pustelnik (Jun 23, 2004 4:31:55 PM)
Hi Andre, hi everyone
Serge Pustelnik (Jun 23, 2004 4:32:16 PM)
Thanks a lot for joining us today - I know traders are busy people so I will get right down to business
Serge Pustelnik (Jun 23, 2004 4:32:38 PM)
My area of expertise is in NASDAQ trading - hence I will talk about what I know well.
Serge Pustelnik (Jun 23, 2004 4:32:58 PM)
As many of you Nasdaq traders probably have noticed - it became increasingly hard to trade NASDAQ
Serge Pustelnik (Jun 23, 2004 4:33:15 PM)
one of the main reasons is that noise increased
Serge Pustelnik (Jun 23, 2004 4:33:20 PM)
less follow through
Serge Pustelnik (Jun 23, 2004 4:33:53 PM)
and very difficult to be first in line
Serge Pustelnik (Jun 23, 2004 4:33:57 PM)
when placing limit orders
Serge Pustelnik (Jun 23, 2004 4:34:08 PM)
The markets are getting more and more efficient every day
Serge Pustelnik (Jun 23, 2004 4:34:19 PM)
and it is the INefficiencies that all traders try to exploit
Serge Pustelnik (Jun 23, 2004 4:34:28 PM)
with the advent of computer trading
Serge Pustelnik (Jun 23, 2004 4:34:38 PM)
the ineffeciencies decrease - thus less room to profit
Serge Pustelnik (Jun 23, 2004 4:35:08 PM)
however, a good trader will always beat a computer
Serge Pustelnik (Jun 23, 2004 4:35:30 PM)
the good thing about seeing computer trading is that computer trading follows rules
Serge Pustelnik (Jun 23, 2004 4:35:34 PM)
if you can figure out the rules
Serge Pustelnik (Jun 23, 2004 4:35:44 PM)
you know how to trade
Serge Pustelnik (Jun 23, 2004 4:35:53 PM)
1)
Serge Pustelnik (Jun 23, 2004 4:36:02 PM)
First step is to indentify computer trading
Serge Pustelnik (Jun 23, 2004 4:36:18 PM)
simple computer programs will high bid or low offer any new price
Serge Pustelnik (Jun 23, 2004 4:36:24 PM)
those are the easiest to spot and to trade against
Serge Pustelnik (Jun 23, 2004 4:36:42 PM)
some computer programs will follow certain sizes
Serge Pustelnik (Jun 23, 2004 4:36:54 PM)
those are also simple to spot - takes more thinking to trade against
Serge Pustelnik (Jun 23, 2004 4:37:22 PM)
some computer progrmas will be more complicated: they will post bids offers, some in the money some outside the spread
Serge Pustelnik (Jun 23, 2004 4:37:27 PM)
some showing size some reserve
Serge Pustelnik (Jun 23, 2004 4:37:40 PM)
those are harder to spot - but still possible with careful watching of the stock
Serge Pustelnik (Jun 23, 2004 4:38:04 PM)
computer trades that just execute at certain times are the hardest to spot
Serge Pustelnik (Jun 23, 2004 4:38:23 PM)
they, however pose a smaller problem for scalping
Serge Pustelnik (Jun 23, 2004 4:38:32 PM)
these are position computer programs
Serge Pustelnik (Jun 23, 2004 4:38:47 PM)
They only increase extra noise - which may not be necesserally bad for scalpers
Serge Pustelnik (Jun 23, 2004 4:39:06 PM)
Let's begin the discussion on the first kind
Serge Pustelnik (Jun 23, 2004 4:39:14 PM)
the automatic high bidder/ low offer
Serge Pustelnik (Jun 23, 2004 4:39:22 PM)
those are the most annoying programs
Serge Pustelnik (Jun 23, 2004 4:39:34 PM)
there are ways of combating them
Serge Pustelnik (Jun 23, 2004 4:39:41 PM)
1) This is by far the best method
Serge Pustelnik (Jun 23, 2004 4:39:53 PM)
PUT YOUR LIMIT ORDERS IN ADVANCE - outside of the spreads
Serge Pustelnik (Jun 23, 2004 4:40:10 PM)
most of these programs are not designed to read the whole level II and high bid old quotes
Serge Pustelnik (Jun 23, 2004 4:40:22 PM)
the algorythms are such that they high bid only NEW quotes
Serge Pustelnik (Jun 23, 2004 4:40:29 PM)
how often did this happen to you:
Serge Pustelnik (Jun 23, 2004 4:40:37 PM)
You trade a stock that has a normal spread of 2 - 3 cents
Serge Pustelnik (Jun 23, 2004 4:40:44 PM)
you get a short
Serge Pustelnik (Jun 23, 2004 4:40:51 PM)
the stock falls 5 cents from the offer
Serge Pustelnik (Jun 23, 2004 4:40:58 PM)
the bid drops (people get scared) to 10 cents
Serge Pustelnik (Jun 23, 2004 4:41:10 PM)
now the spread is 7 cents
Serge Pustelnik (Jun 23, 2004 4:41:15 PM)
you see the move is over
Serge Pustelnik (Jun 23, 2004 4:41:22 PM)
there is 7 cents of spread on the line
Serge Pustelnik (Jun 23, 2004 4:41:33 PM)
you high bid - you are immidatelly hopped by BRUT
Serge Pustelnik (Jun 23, 2004 4:41:43 PM)
by the time you get out - you only catch 2 -3 cents
Serge Pustelnik (Jun 23, 2004 4:41:54 PM)
this is a common situation
Serge Pustelnik (Jun 23, 2004 4:42:02 PM)
the computer's logic process goes as follows
Serge Pustelnik (Jun 23, 2004 4:42:10 PM)
1) the stock is decreasing in volume
Serge Pustelnik (Jun 23, 2004 4:42:16 PM)
the decrease ceased
Serge Pustelnik (Jun 23, 2004 4:42:24 PM)
new bids start to come in (that was you)
Serge Pustelnik (Jun 23, 2004 4:42:35 PM)
Very positive sign of a short term reversal
Serge Pustelnik (Jun 23, 2004 4:42:37 PM)
HIGH BID
Serge Pustelnik (Jun 23, 2004 4:42:46 PM)
it also takes into account that you are a buyer
Serge Pustelnik (Jun 23, 2004 4:42:52 PM)
and if you begin hopping the computer
Serge Pustelnik (Jun 23, 2004 4:43:15 PM)
the computer may be programmed to see that there is real interest - that means if it gets executed it has a buyer, just in case, near-by
Serge Pustelnik (Jun 23, 2004 4:43:32 PM)
the solution - put bids early
Serge Pustelnik (Jun 23, 2004 4:43:43 PM)
suppose in this example you get short
Serge Pustelnik (Jun 23, 2004 4:43:52 PM)
put your bid immediatelly 12 -13 cents away
Serge Pustelnik (Jun 23, 2004 4:44:02 PM)
when the stock gets to that price - make a decision
Serge Pustelnik (Jun 23, 2004 4:44:09 PM)
looks like a good price to get out - keep it there
Serge Pustelnik (Jun 23, 2004 4:44:15 PM)
most computers won't high bid you
Serge Pustelnik (Jun 23, 2004 4:44:30 PM)
if it looks like the stock is going further, cancel, and put it even further away
Serge Pustelnik (Jun 23, 2004 4:44:53 PM)
Second solution to combat these guys
Serge Pustelnik (Jun 23, 2004 4:45:03 PM)
Use descretionary orders
Serge Pustelnik (Jun 23, 2004 4:45:27 PM)
Laser, our trading platform, has the following feature for SIZE, for example
Serge Pustelnik (Jun 23, 2004 4:45:32 PM)
you set the descre
Serge Pustelnik (Jun 23, 2004 4:45:36 PM)
i am sorry*
Serge Pustelnik (Jun 23, 2004 4:45:48 PM)
you set the descretionary setting
Serge Pustelnik (Jun 23, 2004 4:45:52 PM)
to 10 cents
Serge Pustelnik (Jun 23, 2004 4:45:58 PM)
and place a bid
Serge Pustelnik (Jun 23, 2004 4:46:21 PM)
that means, any supermontage order made with 10 cents of your price will execute you
Serge Pustelnik (Jun 23, 2004 4:46:29 PM)
on the level II you will show up at the price you have chosen
Serge Pustelnik (Jun 23, 2004 4:46:35 PM)
Ex:
Serge Pustelnik (Jun 23, 2004 4:46:54 PM)
You place a 10 cent descr. BID on size at 30.55
Serge Pustelnik (Jun 23, 2004 4:47:05 PM)
Size will show up at 30.55
Serge Pustelnik (Jun 23, 2004 4:47:17 PM)
You will buy anywhere from 30.55 to 30.65
Serge Pustelnik (Jun 23, 2004 4:47:26 PM)
This is a very powerful feature
Serge Pustelnik (Jun 23, 2004 4:47:36 PM)
it is as close to as hiding on size can get
Serge Pustelnik (Jun 23, 2004 4:47:55 PM)
when you need to get out - set a desired descretionary setting
Serge Pustelnik (Jun 23, 2004 4:48:07 PM)
put your bid/offer outside the spread and wait to be executed
Serge Pustelnik (Jun 23, 2004 4:48:18 PM)
With this method you can take it one step further
Serge Pustelnik (Jun 23, 2004 4:48:27 PM)
Use the computer's algorythm to your advantage
Serge Pustelnik (Jun 23, 2004 4:48:50 PM)
suppose you are long at 20.23
Serge Pustelnik (Jun 23, 2004 4:49:00 PM)
stock makes a quick move up
Serge Pustelnik (Jun 23, 2004 4:49:11 PM)
the bid is now 20.27 the offer is 20.33
Serge Pustelnik (Jun 23, 2004 4:49:19 PM)
you see that this is the MAX it will go
Serge Pustelnik (Jun 23, 2004 4:49:37 PM)
you do not want to lose the 6 cent spread, but don't mind taking a 2 cent haircut
Serge Pustelnik (Jun 23, 2004 4:49:47 PM)
i.e. you will not be upset to get out at 20.31
Serge Pustelnik (Jun 23, 2004 4:49:58 PM)
you know of a hopping computer presense
Serge Pustelnik (Jun 23, 2004 4:50:11 PM)
Place a decr. offer on Size at 20.34
Serge Pustelnik (Jun 23, 2004 4:50:17 PM)
with a 3 cent setting
Serge Pustelnik (Jun 23, 2004 4:50:33 PM)
then, use 100 share lots to begin high bidding
Serge Pustelnik (Jun 23, 2004 4:50:42 PM)
the computer algorythms logic will be the following:
Serge Pustelnik (Jun 23, 2004 4:50:55 PM)
Move up. Stop, New bids -> therefore stock still is going up
Serge Pustelnik (Jun 23, 2004 4:51:01 PM)
i t will high bid you
Serge Pustelnik (Jun 23, 2004 4:51:20 PM)
keep fighting with the computer until it reaches your desr. price
Serge Pustelnik (Jun 23, 2004 4:51:27 PM)
most computers will use BRUT to shave
Serge Pustelnik (Jun 23, 2004 4:51:31 PM)
brut crosses SIZE
Serge Pustelnik (Jun 23, 2004 4:51:37 PM)
you will get hit out
Serge Pustelnik (Jun 23, 2004 4:51:44 PM)
(depending on the size of course)
Serge Pustelnik (Jun 23, 2004 4:51:55 PM)
if you are completely out - cancel your old bids
Serge Pustelnik (Jun 23, 2004 4:52:00 PM)
the computer is now screwed
Serge Pustelnik (Jun 23, 2004 4:52:07 PM)
...on that position
Serge Pustelnik (Jun 23, 2004 4:52:25 PM)
3). You can enter into an outright war with the computer
Serge Pustelnik (Jun 23, 2004 4:52:55 PM)
Even though our platform is FAST (faster then anything any of you are possibly trading on)
Serge Pustelnik (Jun 23, 2004 4:53:07 PM)
beating a computer by hand will be very difficult
Serge Pustelnik (Jun 23, 2004 4:53:12 PM)
for that we have pegged orders
Serge Pustelnik (Jun 23, 2004 4:53:28 PM)
a pegged order will either keep joining the hopper, or high bidding him, or lagging behind him
Serge Pustelnik (Jun 23, 2004 4:53:35 PM)
that will be instantaneous
Serge Pustelnik (Jun 23, 2004 4:53:44 PM)
some situations will require competition like that
Serge Pustelnik (Jun 23, 2004 4:54:00 PM)
with our technology - you have a better chance of beating them
Serge Pustelnik (Jun 23, 2004 4:54:21 PM)
unless that computer is also on our server - then you have an equal chance at least
Serge Pustelnik (Jun 23, 2004 4:54:51 PM)
Some computers will hop only certain sizes
Serge Pustelnik (Jun 23, 2004 4:55:03 PM)
for example - the developer thinks a step ahead.
Serge Pustelnik (Jun 23, 2004 4:55:17 PM)
a new 100 share bid could be a newbie or someone trying to screw around with my computer
Serge Pustelnik (Jun 23, 2004 4:55:56 PM)
he instructs the computer to ignore 100 shares
Serge Pustelnik (Jun 23, 2004 4:56:38 PM)
therefore you can use reserve features on our plaform
Serge Pustelnik (Jun 23, 2004 4:56:49 PM)
that will show 100 shares (which the computer will ignore)
Serge Pustelnik (Jun 23, 2004 4:57:00 PM)
but in reality put 1000 or any amount that you are trading
Serge Pustelnik (Jun 23, 2004 4:57:35 PM)
Many people also use hidden island features
Serge Pustelnik (Jun 23, 2004 4:57:41 PM)
- then no one knows where you are
Serge Pustelnik (Jun 23, 2004 4:57:55 PM)
Another good way - is to join the hopper
Serge Pustelnik (Jun 23, 2004 4:58:01 PM)
preferrably with reserve on
Serge Pustelnik (Jun 23, 2004 4:58:29 PM)
in the cases with the computer hops with few shares
Serge Pustelnik (Jun 23, 2004 4:58:58 PM)
it may not be bad waiting behind the computer if you have more shares - but this is when you do not have access to features I described above
Serge Pustelnik (Jun 23, 2004 4:59:08 PM)
Another interesting situation to spot
Serge Pustelnik (Jun 23, 2004 4:59:23 PM)
is when there are two similar computer models
Serge Pustelnik (Jun 23, 2004 4:59:33 PM)
they keep fighting against each other - escalating the price
Serge Pustelnik (Jun 23, 2004 4:59:45 PM)
suppose you are in a longer term trade
Serge Pustelnik (Jun 23, 2004 4:59:55 PM)
you decide this is a good time to get out
Serge Pustelnik (Jun 23, 2004 5:00:17 PM)
technicals look weaker, futures begin to turn sour, you are feeling that it is time to get out
Serge Pustelnik (Jun 23, 2004 5:00:30 PM)
but this is an early feeling - no confirmation yet
Serge Pustelnik (Jun 23, 2004 5:00:33 PM)
probably lunchtime
Serge Pustelnik (Jun 23, 2004 5:00:42 PM)
this is when computer trading is most apparent
Serge Pustelnik (Jun 23, 2004 5:00:56 PM)
traders are at lunch - computers don't eat and oggle at passerby girls
Serge Pustelnik (Jun 23, 2004 5:01:23 PM)
you may want to spark a very small move in your direction
Serge Pustelnik (Jun 23, 2004 5:01:27 PM)
to get out at a better price
Serge Pustelnik (Jun 23, 2004 5:01:43 PM)
put a bid for 100 shares - and whatch the computers do the rest - hop each other
Serge Pustelnik (Jun 23, 2004 5:01:52 PM)
sometimes you may want to add a little more oil to the flame
Serge Pustelnik (Jun 23, 2004 5:02:01 PM)
but when they get to a better price for you - execute against them
Serge Pustelnik (Jun 23, 2004 5:02:14 PM)
A lot of market makers looking to dump customer orders use this strategy (by the way)
Serge Pustelnik (Jun 23, 2004 5:03:41 PM)
There are many more ways to combat them but I think it is time for questions. You can always ask more stuff if we run out of time either by email, through a thread in Elite, by phone or those lucky enough to live in the greatest city in the world, are welcome to drop by my office for a chat
Andre (Jun 23, 2004 5:04:06 PM)
That was great, Serge.
Andre (Jun 23, 2004 5:04:19 PM)
We'll post a link to the thread at the end of the chat log.
Serge Pustelnik (Jun 23, 2004 5:04:20 PM)
Thank you. I hope this can help traders make money
Andre (Jun 23, 2004 5:04:32 PM)
Let's get to questions...
joe_blo (Jun 23, 2004 5:04:35 PM)
Isn't manipulating the inside market in order to take advantage of an automated system ILLEGAL? Ie., tricking a brut "hopper" into bidding higher by putting in bids to change the inside market in order to get him to cross you and get your sale -> isn't that stock manipulation? Wouldn't you figure the SEC/NASD is going to have a problem with this?
Serge Pustelnik (Jun 23, 2004 5:05:04 PM)
Beginning with hard ball.
Andre (Jun 23, 2004 5:05:11 PM)
Yes!
Serge Pustelnik (Jun 23, 2004 5:05:27 PM)
Sure market manipulation is illegal - however this is not the absolute case
Serge Pustelnik (Jun 23, 2004 5:05:48 PM)
as long as your bid is a solid bid - ie you are willing to buy
Serge Pustelnik (Jun 23, 2004 5:06:03 PM)
then it is ok. However, if your sole intention is to get someone to hop you
Serge Pustelnik (Jun 23, 2004 5:06:12 PM)
then it is not illegal.
Serge Pustelnik (Jun 23, 2004 5:06:22 PM)
Let me make a small disclaimer here
Serge Pustelnik (Jun 23, 2004 5:06:37 PM)
The methods I described should be used for informational purposes
Serge Pustelnik (Jun 23, 2004 5:06:44 PM)
do not use them to violate any laws
Serge Pustelnik (Jun 23, 2004 5:07:00 PM)
if your sole intention is to manipulate the market
Serge Pustelnik (Jun 23, 2004 5:07:03 PM)
then do not do it
Serge Pustelnik (Jun 23, 2004 5:07:10 PM)
/ga
peterd82 (Jun 23, 2004 5:07:16 PM)
Have you any idea how many computer trading systems are out there?
Serge Pustelnik (Jun 23, 2004 5:07:22 PM)
Yes I do
Serge Pustelnik (Jun 23, 2004 5:07:29 PM)
currently the computer volume is over 50% on NASDAQ
Serge Pustelnik (Jun 23, 2004 5:07:35 PM)
and climbing really high on NYSE as well
Serge Pustelnik (Jun 23, 2004 5:07:39 PM)
note: Listed traders
Serge Pustelnik (Jun 23, 2004 5:07:44 PM)
Its coming your way too.
Serge Pustelnik (Jun 23, 2004 5:07:51 PM)
The total number of system is hard to guage
Serge Pustelnik (Jun 23, 2004 5:08:12 PM)
however, the volume on NASDAQ soon will be over 75%
Serge Pustelnik (Jun 23, 2004 5:08:15 PM)
computerized
Serge Pustelnik (Jun 23, 2004 5:08:29 PM)
For example - we have systems that we host that trade 5 million shares a day
Serge Pustelnik (Jun 23, 2004 5:08:36 PM)
and these are not uncommon
Serge Pustelnik (Jun 23, 2004 5:08:45 PM)
Behind every good system is a good trader
Serge Pustelnik (Jun 23, 2004 5:08:59 PM)
when a trader feels he /she is loosing edge to computers because of speed and scalability
Serge Pustelnik (Jun 23, 2004 5:09:10 PM)
they turn to programmers and to places that can automate the process
Serge Pustelnik (Jun 23, 2004 5:09:17 PM)
/ga
samuritrader (Jun 23, 2004 5:09:32 PM)
do computers only trade the level2 , or do they trade other techs
Serge Pustelnik (Jun 23, 2004 5:09:41 PM)
it depends
Serge Pustelnik (Jun 23, 2004 5:09:55 PM)
anything a person can think of - as long as it is not intuition
Serge Pustelnik (Jun 23, 2004 5:10:04 PM)
it can be quantified
Serge Pustelnik (Jun 23, 2004 5:10:09 PM)
then computer trade everything
Serge Pustelnik (Jun 23, 2004 5:10:21 PM)
the ones you need to worry about
Serge Pustelnik (Jun 23, 2004 5:10:31 PM)
trade mostly off of level II + some techs
Serge Pustelnik (Jun 23, 2004 5:10:48 PM)
/ga
jeff520 (Jun 23, 2004 5:10:59 PM)
given the plethora of computer programs, does bid/ask size and number of individual bids/offers mean anything in Level II anymore?
Serge Pustelnik (Jun 23, 2004 5:11:16 PM)
Good question - not in the old fashion sense
Serge Pustelnik (Jun 23, 2004 5:11:35 PM)
the bids/offers on the level II can give you a good idea of what is going on with computer trading
Serge Pustelnik (Jun 23, 2004 5:11:44 PM)
you need to pay more attention to actual execution
Serge Pustelnik (Jun 23, 2004 5:11:50 PM)
patterns in the changes of the bids and offers
Serge Pustelnik (Jun 23, 2004 5:12:04 PM)
also
Serge Pustelnik (Jun 23, 2004 5:12:18 PM)
it is still very important to pay attention to the market makers
Serge Pustelnik (Jun 23, 2004 5:12:28 PM)
some are automated - but most are still ont
Serge Pustelnik (Jun 23, 2004 5:12:30 PM)
not*
Serge Pustelnik (Jun 23, 2004 5:12:43 PM)
therefore - it takes much more deeper analysis to figure out the level II
Serge Pustelnik (Jun 23, 2004 5:12:59 PM)
and it is still very critical - only the kind of info you get from it is a little different then before
Serge Pustelnik (Jun 23, 2004 5:13:01 PM)
/ga
samuritrader (Jun 23, 2004 5:13:25 PM)
how about volume, rsi , big volume sell offs? moving averages? or big volume run ups
Serge Pustelnik (Jun 23, 2004 5:13:44 PM)
all of that can be used by computer trading
Serge Pustelnik (Jun 23, 2004 5:13:46 PM)
for example
Serge Pustelnik (Jun 23, 2004 5:13:55 PM)
my computer trading implements some RSI
Serge Pustelnik (Jun 23, 2004 5:13:59 PM)
and moving averages
Serge Pustelnik (Jun 23, 2004 5:14:27 PM)
however - my systems would probably not interfere with normal trading - they would look like actual people trading
Serge Pustelnik (Jun 23, 2004 5:14:48 PM)
systems that focus more on technical analysis behave more like human traders
Serge Pustelnik (Jun 23, 2004 5:15:00 PM)
systems that focus on scalping - rarely use technicals
Serge Pustelnik (Jun 23, 2004 5:15:04 PM)
they get a feel for price action
Serge Pustelnik (Jun 23, 2004 5:15:16 PM)
- derived from level II info, execution info, and volume
Serge Pustelnik (Jun 23, 2004 5:15:18 PM)
/ga
stockfrosty (Jun 23, 2004 5:15:27 PM)
Serge, thanks for the informative presentation! You mentioned something about Island "hidden" features. Can you please elaborate. How can we gain access to these features?
Serge Pustelnik (Jun 23, 2004 5:15:51 PM)
Island (INET) now hidden features have been around for years.
Serge Pustelnik (Jun 23, 2004 5:15:56 PM)
Our platform has access to them
Serge Pustelnik (Jun 23, 2004 5:16:00 PM)
what they are is simple
Serge Pustelnik (Jun 23, 2004 5:16:17 PM)
INET does not send a limit order out (does not display it)
Serge Pustelnik (Jun 23, 2004 5:16:21 PM)
and keeps it at their server
Serge Pustelnik (Jun 23, 2004 5:16:35 PM)
if it gets a cross order (either a limit or a market)
Serge Pustelnik (Jun 23, 2004 5:16:46 PM)
it fills the hidden order
Serge Pustelnik (Jun 23, 2004 5:16:57 PM)
To make it a bit clearer (I think I confused some people).
Serge Pustelnik (Jun 23, 2004 5:17:13 PM)
Suppose the inside INET is 20.10 and 20.20
Serge Pustelnik (Jun 23, 2004 5:17:27 PM)
you can put a 20.11 Hidden INET bid
Serge Pustelnik (Jun 23, 2004 5:17:35 PM)
it will not display on Level I I of anyone
Serge Pustelnik (Jun 23, 2004 5:17:40 PM)
when INET gets a sell order
Serge Pustelnik (Jun 23, 2004 5:17:53 PM)
at 20.11 or below - most likely at 20.10
Serge Pustelnik (Jun 23, 2004 5:17:58 PM)
you will get executed at 20.11
Serge Pustelnik (Jun 23, 2004 5:18:17 PM)
computers, other traders do not know you were hiding at 20.11 therefore they did not high bid you
Serge Pustelnik (Jun 23, 2004 5:18:23 PM)
was that sufficient ?
Serge Pustelnik (Jun 23, 2004 5:18:24 PM)
/ga
Serge Pustelnik (Jun 23, 2004 5:18:50 PM)
Note: I will also take questions about Genesis, commission, our history, our technology
Andre (Jun 23, 2004 5:19:31 PM)
We've got some of those already, I'll group them together after we've gotten through some basic strategy questions.
Serge Pustelnik (Jun 23, 2004 5:19:37 PM)
Sure
Guest (Jun 23, 2004 5:20:03 PM)
Have you any indication that algorithmic trading has caused previously volatile stocks to "flatten out" (i.e. become rangebound)?
Andre (Jun 23, 2004 5:20:48 PM)
Have you any indication that algorithmic trading has caused previously volitile stocks to "flatten out" (ie: become rangebound)?
Serge Pustelnik (Jun 23, 2004 5:21:15 PM)
absolutely
virgin (Jun 23, 2004 5:21:37 PM)
Do you think that the advance of automated trading on Nasdaq attributed to the contraction in volatility ?
Serge Pustelnik (Jun 23, 2004 5:21:59 PM)
Yes
Serge Pustelnik (Jun 23, 2004 5:22:01 PM)
It is both ways
Serge Pustelnik (Jun 23, 2004 5:22:19 PM)
as volitility dries up
Serge Pustelnik (Jun 23, 2004 5:22:23 PM)
margins become smaller
Serge Pustelnik (Jun 23, 2004 5:22:41 PM)
therefore increased quantity of trades must happen to keep making the same profit
Serge Pustelnik (Jun 23, 2004 5:22:52 PM)
computer trading excels at managing multiple positions
Serge Pustelnik (Jun 23, 2004 5:23:02 PM)
a good human scalper can manage 10 positions
Serge Pustelnik (Jun 23, 2004 5:23:12 PM)
a computer can manage 10,000
Serge Pustelnik (Jun 23, 2004 5:23:22 PM)
and remember - most strategies are very similar
Serge Pustelnik (Jun 23, 2004 5:23:29 PM)
therefore, computers have to compete against each other
Serge Pustelnik (Jun 23, 2004 5:23:36 PM)
in simple terms
Serge Pustelnik (Jun 23, 2004 5:23:40 PM)
accept worse prices
Serge Pustelnik (Jun 23, 2004 5:23:46 PM)
as long as the margin is still above trading cost
Serge Pustelnik (Jun 23, 2004 5:23:58 PM)
that is why the ranges become smaller
Serge Pustelnik (Jun 23, 2004 5:24:14 PM)
you can also look at ranges of volitility, their trend and the trend in commissions
Serge Pustelnik (Jun 23, 2004 5:24:30 PM)
the commissions are dropping
Serge Pustelnik (Jun 23, 2004 5:24:45 PM)
therefore you can take less absolute profit in cents/points to make the same money
Serge Pustelnik (Jun 23, 2004 5:24:50 PM)
because the commission is cheaper
Serge Pustelnik (Jun 23, 2004 5:25:01 PM)
many traders may feel crowded out that still pay high commission
Serge Pustelnik (Jun 23, 2004 5:25:16 PM)
/ga
Andre (Jun 23, 2004 5:25:22 PM)
Folks, I'm going to have to put a cap on the questions, Serge did say that he can stay around for a while longer, but we've got pently in the que. We'll now move over to some questions about Genesis.
Andre (Jun 23, 2004 5:25:39 PM)
If we have time, we'll get back to more general strategy questions.
Marc to Market (Jun 23, 2004 5:26:03 PM)
If you're big into scalping the Nasdaq, why doesn't your firm offer per ticket pricing? If I were to pay per share, I'd be literally spending thousands and thousands a week extra in commissions!!!
Serge Pustelnik (Jun 23, 2004 5:26:23 PM)
We can structure a per ticket structure
Serge Pustelnik (Jun 23, 2004 5:26:29 PM)
for that you need to contact me directly
Serge Pustelnik (Jun 23, 2004 5:26:46 PM)
/ga
Serge Pustelnik (Jun 23, 2004 5:27:14 PM)
Note: we are free to structure any special deal: per ticket, per fill, combination of the two. etc.
Andre (Jun 23, 2004 5:27:54 PM)
Serge will post his contact info at the end of the chat.
Andre (Jun 23, 2004 5:27:56 PM)
We've got some questions on programming. I'll send two in a row:
Dustin (Jun 23, 2004 5:28:01 PM)
do you have in-house programmers (who are not traders) that would sign nd's?
Serge Pustelnik (Jun 23, 2004 5:28:01 PM)
shoot
Avalanche (Jun 23, 2004 5:28:14 PM)
if a trader at your firm has an idea that he wants to automate, can your firm assist that trader in automating the strategy? if so what does the trader give up, i.e. what is the split between the firm and the trader if he provides the idea and the firms infastructure and captial are used to trade it?
Serge Pustelnik (Jun 23, 2004 5:29:13 PM)
Dustin and Avalanche - our programmers are building the trading platform - they do not assist traders in taking their idea to the computer. They help with some tech issues but do not do the whole process.
Serge Pustelnik (Jun 23, 2004 5:29:26 PM)
They are very talented programmers and they are very expensive
Serge Pustelnik (Jun 23, 2004 5:29:39 PM)
It is cheaper and more efficient to get your own developers
Serge Pustelnik (Jun 23, 2004 5:29:55 PM)
friends, or hire contractually (the market for software engineers is big)
Serge Pustelnik (Jun 23, 2004 5:30:07 PM)
that way you can save money and protect your idea
Serge Pustelnik (Jun 23, 2004 5:30:28 PM)
our techies - do not look into the trading strategy unless our traders ask them to
Andre (Jun 23, 2004 5:30:36 PM)
Let extend that tought...
Guest (Jun 23, 2004 5:30:41 PM)
I've heard a lot of great things about Genesis' speed of execution. However, I do not have experience writing computerized trading models. Can you give me any advice on how to develop my trading strategies into computerized models?
Serge Pustelnik (Jun 23, 2004 5:30:49 PM)
We can help find programmers
Serge Pustelnik (Jun 23, 2004 5:30:52 PM)
that could be qualified
Serge Pustelnik (Jun 23, 2004 5:31:17 PM)
we also have no problem signing NDs (non-disclosures)
Avalanche (Jun 23, 2004 5:31:21 PM)
So can you automate strategies through the Laser Platform or how do you do it? What are you using to automate a 5 million share a day strategy. A T-1, C++, and what else? I'd rather compete strategy to strategy because it seem obvious that a computer is always going to be faster than I.
Serge Pustelnik (Jun 23, 2004 5:31:57 PM)
You can build an automated system via our API in C++ (the MOST efficient language for automation)
Serge Pustelnik (Jun 23, 2004 5:32:07 PM)
you can also build simple systems in Excel
Serge Pustelnik (Jun 23, 2004 5:32:12 PM)
(we have connectivity there as well)
Serge Pustelnik (Jun 23, 2004 5:32:20 PM)
we are also working on rolling out a C version
Serge Pustelnik (Jun 23, 2004 5:32:26 PM)
and an ActiveX version
Serge Pustelnik (Jun 23, 2004 5:32:34 PM)
T1 you do not need
Serge Pustelnik (Jun 23, 2004 5:32:41 PM)
we host the servers on site free of charge
smilesandmore (Jun 23, 2004 5:32:46 PM)
Any plans for a Java-version?
Serge Pustelnik (Jun 23, 2004 5:32:51 PM)
absolutely not
Serge Pustelnik (Jun 23, 2004 5:32:58 PM)
Java is C++ based
Serge Pustelnik (Jun 23, 2004 5:33:01 PM)
and very slow
Serge Pustelnik (Jun 23, 2004 5:33:03 PM)
for automation
Serge Pustelnik (Jun 23, 2004 5:33:16 PM)
anyone that knows java will not have a hard time switching to C++
Andre (Jun 23, 2004 5:33:44 PM)
Ok, more Genesis questions. Such as...
Serge Pustelnik (Jun 23, 2004 5:33:48 PM)
our ping time to Inet is 2 ms round trip - you want to use that to your advantage
stockfrosty (Jun 23, 2004 5:33:58 PM)
How much leverage do you offer at Genesis?
Serge Pustelnik (Jun 23, 2004 5:34:22 PM)
Leverage is a tricky issue. It all depends on trading history, trading style, risk profile
Serge Pustelnik (Jun 23, 2004 5:34:32 PM)
we are probably one of the safest houses in the street
Serge Pustelnik (Jun 23, 2004 5:34:39 PM)
we take risk control very seriously
Serge Pustelnik (Jun 23, 2004 5:34:53 PM)
a discussion of leverage is usually done privately and in descretion
Serge Pustelnik (Jun 23, 2004 5:35:07 PM)
Hedge funds that trade through us
Serge Pustelnik (Jun 23, 2004 5:35:22 PM)
trust us with a lot of money - they would not want us to go crazy with leverage
Serge Pustelnik (Jun 23, 2004 5:35:35 PM)
issues concerning that should be discussed over the phone or in person
Serge Pustelnik (Jun 23, 2004 5:35:37 PM)
/ga
samuritrader (Jun 23, 2004 5:35:42 PM)
Serge, I'm trading with ameritrade and I am thinking of trading with your place, but on the elite trader you hear of guys blowing up, and taking peoples money, what keeps genesis from doing that?
Serge Pustelnik (Jun 23, 2004 5:36:01 PM)
Good questions
Serge Pustelnik (Jun 23, 2004 5:36:05 PM)
Several things
Serge Pustelnik (Jun 23, 2004 5:36:15 PM)
One - we have retail accounts (SIPC insured) same as Ameritrade
Serge Pustelnik (Jun 23, 2004 5:36:21 PM)
therefore your funds will be protected
Serge Pustelnik (Jun 23, 2004 5:36:26 PM)
two - Prop side
Serge Pustelnik (Jun 23, 2004 5:36:32 PM)
our experience and reputation in the industry
Serge Pustelnik (Jun 23, 2004 5:36:37 PM)
we have been around for 5 years
Serge Pustelnik (Jun 23, 2004 5:36:44 PM)
so we did not just open up
Serge Pustelnik (Jun 23, 2004 5:36:55 PM)
second - our references
Serge Pustelnik (Jun 23, 2004 5:36:59 PM)
hedge funds that trade through us
Serge Pustelnik (Jun 23, 2004 5:37:13 PM)
whatever you would like to see to make you comfortable - I think we can furnish
Serge Pustelnik (Jun 23, 2004 5:37:24 PM)
Our risk management is another factor
Serge Pustelnik (Jun 23, 2004 5:37:29 PM)
it is very tight and very careful
Serge Pustelnik (Jun 23, 2004 5:37:40 PM)
there is a lot more of our money at risk in Genesis then traders'
Serge Pustelnik (Jun 23, 2004 5:38:12 PM)
but again - you can always trade a retail account that is federally insured
Serge Pustelnik (Jun 23, 2004 5:38:14 PM)
/ga
marketwizard74 (Jun 23, 2004 5:38:20 PM)
Does Genesis offer regular customers leverage?
Serge Pustelnik (Jun 23, 2004 5:38:36 PM)
to retail customers the leverage has to follow Reg T
Serge Pustelnik (Jun 23, 2004 5:38:42 PM)
therefore 4:1 intraday
Serge Pustelnik (Jun 23, 2004 5:38:45 PM)
2:1 overnight
Serge Pustelnik (Jun 23, 2004 5:38:54 PM)
/ga
rambo11 (Jun 23, 2004 5:39:15 PM)
Does Genenis accept Canadian customers?
smilesandmore (Jun 23, 2004 5:39:23 PM)
I am from Europe. Can I trade with Genesis and do you charge fees for wiring my
smilesandmore (Jun 23, 2004 5:39:25 PM)
funds to a bank outside of the US?
Serge Pustelnik (Jun 23, 2004 5:39:39 PM)
Canadian - no
Serge Pustelnik (Jun 23, 2004 5:39:54 PM)
however there are several hedge funds that use our software and clearing
Serge Pustelnik (Jun 23, 2004 5:40:04 PM)
that may accept Canadian traders
Serge Pustelnik (Jun 23, 2004 5:40:15 PM)
you may want to seek those out - our I will point you into the right direction
Serge Pustelnik (Jun 23, 2004 5:40:22 PM)
other foreign traders are fine!
Serge Pustelnik (Jun 23, 2004 5:40:26 PM)
to wire funds out
Serge Pustelnik (Jun 23, 2004 5:40:33 PM)
there is a $25.00 fee
Serge Pustelnik (Jun 23, 2004 5:40:43 PM)
for some foreign banks it may be $50.00
Serge Pustelnik (Jun 23, 2004 5:40:47 PM)
for check - it is free
Serge Pustelnik (Jun 23, 2004 5:40:48 PM)
/ga
Andre (Jun 23, 2004 5:42:10 PM)
Folks,
Andre (Jun 23, 2004 5:42:33 PM)
Serge has been with us forr quite awhile, and we have more questions, but we really do need to let him go.
Andre (Jun 23, 2004 5:42:53 PM)
However, I've got one last one here for him.
marketwizard74 (Jun 23, 2004 5:42:59 PM)
I've been told that Genesis is an inferior platform when it comes to trading listed stocks. Can you tell us what you've done in the past year to improve your listed trading?
Serge Pustelnik (Jun 23, 2004 5:43:08 PM)
Absolutly
Serge Pustelnik (Jun 23, 2004 5:43:15 PM)
I am VERY glad this question is brought up
Serge Pustelnik (Jun 23, 2004 5:43:26 PM)
1) Most places cannot compete with Genesis' rates
Serge Pustelnik (Jun 23, 2004 5:43:42 PM)
the easiest thing to say is to blame the platform
Serge Pustelnik (Jun 23, 2004 5:43:50 PM)
it is true that Genesis was designed for trading NASDAQ
Serge Pustelnik (Jun 23, 2004 5:43:53 PM)
but that is feature wise
Serge Pustelnik (Jun 23, 2004 5:44:08 PM)
in reality the software is designed for efficient execution and order placement
Serge Pustelnik (Jun 23, 2004 5:44:14 PM)
and it doesnt matter which market you trade
Serge Pustelnik (Jun 23, 2004 5:44:22 PM)
think of the platform as a car
Serge Pustelnik (Jun 23, 2004 5:44:27 PM)
the execution is the engine
Serge Pustelnik (Jun 23, 2004 5:44:34 PM)
the features are the options
Serge Pustelnik (Jun 23, 2004 5:44:41 PM)
we have a ferarri engine
Serge Pustelnik (Jun 23, 2004 5:44:47 PM)
now for options:
Serge Pustelnik (Jun 23, 2004 5:44:50 PM)
we have build
Serge Pustelnik (Jun 23, 2004 5:44:52 PM)
1) Filters
Serge Pustelnik (Jun 23, 2004 5:45:02 PM)
2) Connectivity to Esignal
Serge Pustelnik (Jun 23, 2004 5:45:13 PM)
3) Dynamic Board View
Serge Pustelnik (Jun 23, 2004 5:45:24 PM)
4) Exchange orders (NX, DOT, stop, etc.)
Serge Pustelnik (Jun 23, 2004 5:45:28 PM)
5) Basket Trading
Serge Pustelnik (Jun 23, 2004 5:45:49 PM)
6) Our own fast charting
Serge Pustelnik (Jun 23, 2004 5:45:59 PM)
A lot of other things that listed traders ask us
Serge Pustelnik (Jun 23, 2004 5:46:09 PM)
Note: the difference between Genesis and most places
Serge Pustelnik (Jun 23, 2004 5:46:15 PM)
our software WAS and IS designed in-house
Serge Pustelnik (Jun 23, 2004 5:46:24 PM)
I personally work with traders to get their input
Serge Pustelnik (Jun 23, 2004 5:46:35 PM)
and we put features in very quickly
Serge Pustelnik (Jun 23, 2004 5:46:43 PM)
a fellow ET member, who trades through us
Serge Pustelnik (Jun 23, 2004 5:46:51 PM)
asked us for a unique feature that we never thought of using
Serge Pustelnik (Jun 23, 2004 5:46:58 PM)
(he trades all listed)
Serge Pustelnik (Jun 23, 2004 5:47:07 PM)
two days later - it was built
Serge Pustelnik (Jun 23, 2004 5:47:27 PM)
Another trader asked us for a filter he had been asking Redi + to build for 2 years
Serge Pustelnik (Jun 23, 2004 5:47:32 PM)
after 3 days - it was built
Serge Pustelnik (Jun 23, 2004 5:47:51 PM)
If yo uhave more questions
Serge Pustelnik (Jun 23, 2004 5:48:12 PM)
please call me at 212-668-0888, email at serge_pustelnik@gndt.com, send PM to this username
Andre (Jun 23, 2004 5:48:19 PM)
Serge, this has been a great chat... thanks so much for joining us today!
Serge Pustelnik (Jun 23, 2004 5:48:31 PM)
Thank you Andre - thanks everyone for joining in
Andre (Jun 23, 2004 5:48:44 PM)
Folks, you can find more about Genesis Securities at: http://www.gndt.com
Andre (Jun 23, 2004 5:48:58 PM)
And for more specific information on the Laser Platform, go here: http://www.gndt.com/tech_trade_sys.aspx
Andre (Jun 23, 2004 5:49:32 PM)
We will have a log posted soon at: http://www.elitetrader.com/ch/index.cfm
samuritrader (Jun 23, 2004 5:50:06 PM)
Thank you.
virgin (Jun 23, 2004 5:50:34 PM)
thanks
Andre (Jun 23, 2004 5:50:47 PM)
And while this chat session may have ended, the discussion doesn't have to. For additional questions and comments, please see the following thread on our message board: http://www.elitetrader.com/vb/showthread.php?threadid=34571
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