Question Re: Automated Scalping

Discussion in 'Automated Trading' started by HotTip, May 11, 2010.

  1. HotTip


    Sorry. I assumed that scalping by definition was a reversion strategy.
    #11     May 11, 2010
  2. Indicators are definitely:

    * ATR - if tthe ATR goes significantly crazy, things are bad.
    * Tick jumps. Depending on instrument (Watch futures, please), if things do not move nicely, the market is definitly not normal. YM futures had jumps of 150 dow points as fas as I could see.
    * Bid/Ask total volume over like 10 levels. In the YM bids and asks basically disappeared, plus the spread.

    The last is a good indicator when a market gets dangerous - if bid/ask volume is really low, a stop loss cascade can get REALLY ugly, and that can be a normally non-move.

    Together they could definitely form a breaker circuit.
    #12     May 12, 2010
  3. rosy2,

    Do you not find the cost of "quit before you reach your loss limit" when spread tells you market is different, is prohibitive.

    The cost of exiting a trade, and missing potential opportunities, is usually higher than the benefit of getting out before a bad move.

    Do you find otherwise in your backtesting?
    #13     May 12, 2010
  4. I think regardless of the attempt to tell when things may be different, sudden shocking news may not be detectable

    For example, if there is a story breaking that some kind of nuclear exchange occurred (even false), then the serious professionals may be way ahead of you.

    You could wind up bankrupt before you had a chance to sleuth

    There really is no excuse for people who think minimal trading margins are a reason to be leveraged 50:1 on s&p's. There are always going to be black swans. The best protection is either to keep leverage to a reasonable level, buy options instead of instruments, be very diversified/currency neutral, etc.

    The meltdown of Wall Street shows that even the smartest still can train wreck,
    #14     May 12, 2010
  5. rosy2


    no, you can always set place new orders to get back in when the market calms down. this is a scalping much is the cost? a tick
    #15     May 12, 2010
  6. it depends on your strategy, i assume you dont care if the market makes large moves as long as the liquidity is intact - which means bid/ask spread. In that case what you said would work, something like below.

    I think when shit hits the fan, it's best to use the most simple monitors as oppose to any of those fancy indicator, and you cant get any simpler than raw tick data as they are streamed in. I wouldnt use/trust anything else, and if tick data has gone bad, then you know it's over.

    if ( abs( - tick1.ask) > (avg+constant) AND abs( - tick2.ask) > (avg+constant) etc.. ) OR current_tick.quote_wait_time > x time_constant )
    send bing alert
    business as usual

    you can have multiple feeds hooked up, using worker threads to monitor each of the feeds independently, if most of them start to turn red, stop trading. This assume your system is listening to tick data from the vendors.
    #16     May 12, 2010
  7. rosy2,

    Being out by 1 tick in FX isn't guaranteed...

    I guess markets are different.
    #17     May 12, 2010
  8. rosy2,

    Sorry - another thought.

    If you are picking up that market is "different" surely you are less likely to get out for 1 tick?

    Would spreads not be likely to have widened?
    #18     May 13, 2010
  9. edbar


    The DOW was dropping 100 points a minute. There was no question that we were going down.

    I think it comes down to what do you want to do while the market is crashing.

    My traders did exactly what they were supposed to do. The short traders rode the market down and closed all short positions profitably at or near the bottom. The long (swingtrade) traders rode it down and added to their positions at or near the bottom and then rode the market back up.

    So I guess the answer to your question (for me anyway) is to be prepared ahead of time for what can go wrong, so that you can take advantage of it.

    Some people say last Thursday as the worse day ever, while I thought it was vintage; the best stock day I've ever seen. I would be surprised if we ever get to see that happen again. That day was made for robotic traders. If you manually trade and took a break for 5 minutes, then you missed it, but the robotic traders were all over it.

    #19     May 13, 2010