I'm familiar with how HFT players execute their edges and rely on technical infrastructure, and I'm familiar with how the analysts and fundamentals players derive an edge. But what is the path of least resistance for an automated retail trader? The more the trade trends towards riskless and shorter in duration, the more a certainty that HFT has beat me to the punch. As far as long term swing trading, locking up capital and overnight risks becomes a real problem. Has anyone out there gone from institutional to independent+retail, or is it always a matter of taking what one knows and moving with institutional understanding and forking off an independent operation?
Path of least resistance? Copy the existing HFT algos. Get a hold of some sub-second tape and it becomes very clear that a few of the HFT algos are just doing the same thing as soon as soon as a few hyper prints hit the tape.
This is a good article to read from one of the T3Live guys: http://www.twsinvestments.com/2010/02/hft-forcing-traders-to-become-more.html I'm a trader with Bright, and we still have alot of traders doing very well, we're slowly adapting to this new HFT world. The number one adaptation you can make is to become a liquidity taker. Passive market making doesn't work in this environment.
You might have to rephrase your question. There is a very big difference between Institutional HFT and you (and me). We do not HFT, and in reality most HFT are LIQUIDITY PROVIDERS. You do not have the capital or speed to perform these functions. You can automate strategies, but you will not be classified as a HFT at any point. There are no retail HFT, that is a play on words at best.
They are not strictly liquidity providers. They remove also, for a number of reasons. And when they do remove, they leave a mark on the tape that looks like something that would be trade-able during a backtest on a retail platform, but isn't. So the question I am specifically asking is where in this giant spectrum, from HFT to really LFT, does a retail automated trader find a niche.
What are the guys who are succeeding doing, in a general sense -- what types of strategies? Momentum, multi-day reversion to the mean type stuff, and what kind of hold types are we looking at?
MOST are Liquidity Providers. Don't think you can play their 20ms game. That is a fallacy. You basically "get in where you fit in" my friend. No one is going to give you their style if it is truly profitable. My advice to you would be to focus on MEAN REVERSION. GL