Math Whiz Trades Without Humans

Re:Math Whiz Trades Without Humans by smabie on Saturday December 07, 2019 @10:07AM (#21730615)

You can’t make less than a cent per trade in most markets. The bid-ask spread can never be less than a cent. I guess you could make less than cent with commissions, but you certainly can’t make $0.0000001.

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Re:Math Whiz Trades Without Humans by notavalleyman on Saturday December 07, 2019 @11:19AM (#21731014)

This is a result of the common Maker/Taker pricing model. [1]

Those who "make" liquidity by publicly quoting ask/bids are rebated fractions of a cent when their orders are filled, and those who "take" liquidity by exercising the Maker's position are charged.

This is separate to the spreads. The book Flash Boys has a very good explanation of the model.

[1] https://www.investopedia.com/articles/active-trading/042414/...

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Re:Math Whiz Trades Without Humans by cheez on Saturday December 07, 2019 @12:25PM (#21731403)

* Number of trades = 100000

* Number of successful trades = 1

* Number of unsuccessful trades = 999,999

* Profit on successful trade = 1000000

* Loss on each unsuccessful trade = -1

* Net profit: $1

* Net profit/trade: $0.00001

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Re:Math Whiz Trades Without Humans by smabie on Saturday December 07, 2019 @12:46PM (#21731508)

Well if we’re averaging, sure. But that’s not what the parent is talking about. Moreover, what you’re describing isn’t a HFT strategy, it’s an investment strategy.

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Re:Math Whiz Trades Without Humans by cheez on Saturday December 07, 2019 @01:19PM (#21731695)

No, that is how you think about high frequency trades. Lots of trades in a small amount of time, with a tiny positive expectancy.

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Re:Math Whiz Trades Without Humans by smabie on Saturday December 07, 2019 @02:35PM (#21732113)

https://www.reuters.com/article/2014/11/13/us-markets-virtu-...

So Virtu profits on 51-52% of its trades. The type of math you are describing does not make any sense. Unless Virtu is significantly different from every other HFT firm, your idea of high asymmetry of profit and losses is not true.

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Re:Math Whiz Trades Without Humans by cheez on Saturday December 07, 2019 @10:29PM (#21734186)

I meant about how you make 0.00001 per trade is possible. I just didn't want to figure out the 50-51% of trades numbers.

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