With the HFTs ruling the short term trading patterns, you see many more intraday overbought and oversold conditions that are both irrational and deceptive. What I mean by deceptive is that some of these intraday movements seem like a new breakout or a breakdown from an important price level, but in hindsight, more often than not, they are massive stop runs that marked an intermediate term top or bottom. For example, on February 11, you saw a massive spike in Treasury prices that ran over a lot of shorts, both with short term and long term trading horizons. The HFTs can sense these dislocations and can sense when big orders are about to hit the screens, so they front run them, exacerbating the moves. Since too many pile onto the same side, you get really big moves, which reflexively causes more panic until the moves exhausts itself as the panic exhausts itself and the HFTs close out their positions for fat profits. There are many predatory algos that specialize in front running institutional order flow in order to make quick short term high probability trades. Ironically, the best way to prevent them from front running so boldly is to have spoofers fake institutional order flow to get HFTs to overreact to size on the order books. The spoofers keep the HFTs more cautious when front running. But now that spoofing is being made illegal, you get front running run amok, leading to days like February 11, when you get massive short squeezes in Treasury futures which lead the correlation algos to short the S&P and Eurostoxx futures. It is harder than ever to daytrade this algo driven market, especially for counter trend traders, which is why I have expanded my time frame to more swing trading, with very little daytrading. Most of my trades now last from 2 days to 2 weeks. When intraday price patterns were less random, I did a lot more daytrading. But the algos are so quick to catch on to historical intraday price patterns that they have made past short term trading strategies less effective and lower probability. The HFTs are going to be much better than you at taking advantage of intraday opportunities. I don't want to compete in the timeframe where they are the best. The longer the timeframe, the more favorable it is for perceptive discretionary traders over computer algos.
I don't get it. You say there are lots of false breakouts, then say you're struggling as a countertrend trader. Wouldn't false moves be good for you to trade against?
Consider this: HFT just makes use of the TA-believers. Since almost everybody in TA uses the same parameters for the oscilllators and indicators, then when everybody expects a reversal, then HFT just makes use of that hope by the sheer power they have, simply forcing the market exactly to do the opposite! Imagine the giant profits!... ;-) I've experienced that pattern many times when I was TA-trading many years ago. Unfortunately I didn't know then what was going on. I can understand the contrarians.
My research using realistic simulations confirms that: the shorter the timeframe the more riskier it gets (MDD high), 2 days to 2 weeks is ideal for a low MDD. But that alone isn't enough, one also must apply diversification, and scaling-in/out strategies. But it is also true that the shorter the average trade duration is, the more profit can be made. One just needs to find the right balance, somewhere in between... Spikes in market data are a real problem, one should work with smoothed data, and watch their durations...
I can only go by my trading results, where my longer term trades massively outperform my short term trades of less than 24 hours. The performance difference was much more even before 2009.
Right, the main prey of the HFTs are active trading institutions, ie hedge funds, and the TA based daytraders are just icing on the cake.
Being cheeky or serious? To me, that's fairly vague and hardly a solid argument for your statement that intraday price patterns are more random today compared to some prior time period, for instance the pre-HFT era. You may of course be right. I'd just like to see your claim backed by some type of data other than your personal P&L. To me, it seems the markets are still contained by a high, a low and multiple swings in between from start to close. In recent days, as many as 10+ major swings. Nice and clean. The worst thing for a day trader is those narrow range days where the market hardly moves. In fact, I've asked about this in the past when people claim that the markets are so much different today. Is there a chart that can illustrate this difference perhaps? Were the price moves cleaner with less retraces? Is that it? I just don't get clearly what the actual difference is. What I do know though, is that it's not very uncommon for some trader to be thriving during a certain period only to lose the next. This really represents the challenge of the ever changing market conditions and market cycles. Sincerely.