Is First hours better for real movements? / IB Simulated Orders and Market Makers

Discussion in 'Automated Trading' started by tommaso, Mar 15, 2008.

  1. tommaso

    tommaso

    Dear friends,

    I am still programming and refining the logic of the the trading BOT we talked about in a previous post.

    I have begun to test it in the "paper account" of IB and would like to ask 2 question
    [let's say first of all I am a software man and do not know the inner working of markets].


    1.

    I can clearly see, having spent uncountable hours studying those ask/bid waves and
    writing code that the Market Making (MM) program - most of the time - reacts sharply to
    orders in the few next seconds after an order is issued. And this happens systematically.
    I can clearly show that to anyone believing that the MM is neutral.

    My question is, how can the MM program react to "simulated" orders. Is there a mechanism
    that allows to say that an order is simulated and still have a reaction from the market AS IF
    the order is a real one ?


    2.

    I have been running the BOT in the last 3 days in the paper account.
    The first day was weak. The last 2 days (thursday and friday) I noticed
    that "true" trends were only within, say the first hour.

    Friday in particular the BOT made about 1,200 dollars from 2:50 to 3:30pm (Italian time)
    but after that practically on any order the MM programs inverted the trend on nearly each
    order and within few hours the BOT went negative. Nearly any order at the beginning of
    the trading day was winning and the MMs seemed not to care about the BOT and to follow
    vigorously trend that they already "decided" .

    A similar behaviour I noticed the day before.

    I have also noticed that around 17-18 pm (italian time) those MM wonder often without
    any real direction. And seems to be waiting for someone daring to enter to play tricks
    of any kind to try to grab each order.

    It also seems to me that toward the end of the day, the MM programs react by almost
    systematically inverting the trend when an order is placed. You BUY, they go down and
    vice versa.

    My question: According to your knowledge of markets, can I assume that I can generally get
    the best from the bot by running it, say within the first hours? Or what I observed is just
    one of endless possibilities?

    Thanks for any advice.

    Tommaso