High Frequency Trading / Algorithmic Trading

"High-Frequency Trading," a controversial technique the SEC is scrutinizing in which computers can make thousands of stock trades in less than a second.

In electronic algorithmic trading or automated trading, also known as algo trading, black-box trading or robo trading, is the use of electronic platforms for entering trading orders with an algorithm deciding on aspects of the order such as the timing, price, or quantity of the order, or in many cases initiating the order without human intervention.

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The Supra-Vantage

 While the Supra Vantage® system is capable of being used in that fashion, we have found it more cost effective to take another approach. The Supra Vantage® is an algorithmic filtering system that generates alerts that aid us in predicting future stock prices. We place trades based on the predictions generated by the system alerts.  Consequently we may go hours even days when trading stocks looking to make as large a profit as we can with in reason. This is in essence is the opposite of (HFT).

The Supra-Vantage states they are 8 out of 10 on their stock picks!

 ( 80% Accuracy )

 Any thing less than 36% a year they consider a failure..

Ask about live demo!!!!!!!!

 Wall Street Insight lead moderator Cedric Burl, speaks with financial professionals that have had direct exposure to the Supra Vantage.

WSI Q&A With the Developer

The Supra Vantage® is often confused with High Frequency Trading (HFT).  People often confuse Algorithmic Trading with (HFT).  We would like to take moment to explain the distinctions.www.supravantage.net

First I would like to clarify. Algorithmic Trading is the use of mathematical formulas to make investment decisions usually through the use of high power computers. There are many forms of Algorithmic Trading. (HFT) and the Supra Vantage® are two distinct forms of the wide spectrum of Algorithmic Trading.

Next let us explain High Frequency Trading (HFT). (HFT) is simply the use of very fast computers to constantly monitor certain stocks looking to trade several times per day or per hour while attempting to make very small profits on each trade. Traders who employ this strategy make use of various mathematical formulas (or better known as algorithms) to track, evaluate, and monitor several stocks at once. This exercise can turn into what could ultimately be hundreds of trade executions per minute on several different stocks.

The idea behind this strategy is to generate a high trade volume capturing small incremental profits per trade. The (HFT) school of thought states these small profits collectively will translate into good returns over time.

There are many critics of this trading style. Many say (HFT) is bad for the market. That may be so I cannot say for sure. However to date the regulators have not found a credible legal basis to curtail their activity.  I can see why it would be difficult to legally curtail their activity.   To effectively curtail the activity of (HFT) the lawmakers would need to perhaps limit the number of times per day someone could trade, or put profit minimums an maximums on trade positions, or maybe telling traders they have to hold stocks for certain period of time once they have been purchased, or outlawing all computer use while trading stocks.

 

It would be totally un-American to impose these type rules on stock traders and or investors but anything less in my opinion will do nothing to slow down the (HFT). I say the use of computers in the market is the natural progression of evolution.

Now we explain The Supra Vantage®. Presently we do not (HFT) at the Supra Vantage®. While the Supra Vantage® system is capable of being used in that fashion, we have found it more cost effective to take another approach. The Supra Vantage® is an algorithmic filtering system that generates alerts that aid us in predicting future stock prices. We place trades based on the predictions generated by the system alerts.  Consequently we may go hours even days when trading stocks looking to make as large a profit as we can with in reason. This is in essence is the opposite of (HFT).

 

The Supra Vantage® approach is much more difficult intellectually than (HFT).  (HFT) operations require a great deal of additional computer infrastructure and costly connections with little thought from minute to minute. We at the Supra Vantage® can simply place stock trades ahead of the crowd because we know to high degree of certainty where they will potentially move. The out right prediction of stock prices is a very intellectually challenging undertaking. The Supra Vantage® was examined by the securities regulators and they found nothing improper about the methodologies or technologies employed.

The Supra Vantage® is continuously generating alerts ahead of major market moving press releases and breaking news that many times lead to exceptional returns for those who act.  For  more information on the Supra Vantage® visit www.supravantage.net .

High Frequency Trading / Algorithmic Trading

Steve Kroft gets a rare look inside the secretive world "high-frequency trading," a controversial technique the SEC is scrutinizing in which computers can make thousands of stock trades in less than a second.

 

From Wikipedia, the free encyclopedia

In electronic algorithmic trading or automated trading, also known as algo trading, black-box trading or robo trading, is the use of electronic platforms for entering trading orders with an algorithm deciding on aspects of the order such as the timing, price, or quantity of the order, or in many cases initiating the order without human intervention.

Algorithmic trading is widely used by pension funds, mutual funds, and other buy side (investor driven) institutional traders, to divide large trades into several smaller trades in order to manage market impact, and risk. Sell side traders, such as market makers and some hedge funds, provide liquidity to the market, generating and executing orders automatically.

A special class of algorithmic trading is "high-frequency trading" (HFT), in which computers make elaborate decisions to initiate orders based on information that is received electronically, before human traders are capable of processing the information they observe. This has resulted in a dramatic change of the market microstructure, particularly in the way liquidity is provided.

Algorithmic trading may be used in any investment strategy, including market making, inter-market spreading, arbitrage, or pure speculation (including trend following). The investment decision and implementation may be augmented at any stage with algorithmic support or may operate completely automatically.

A third of all European Union and United States stock trades in 2006 were driven by automatic programs, or algorithms, according to Boston-based financial services industry research and consulting firm Aite Group. As of 2009, HFT firms account for 73% of all US equity trading volume.

In 2006 at the London Stock Exchange, over 40% of all orders were entered by algo traders, with 60% predicted for 2007. American markets and European markets generally have a higher proportion of algo trades than other markets, and estimates for 2008 range as high as an 80% proportion in some markets. Foreign exchange markets also have active algo trading (about 25% of orders in 2006). Futures and options markets are considered to be fairly easily integrated into algorithmic trading, with about 20% of options volume expected to be computer generated by 2010. Bond markets are moving toward more access to algorithmic traders.

One of the main issues regarding HFT is the difficulty in determining just how profitable it is. A report released in August 2009 by the TABB Group, a financial services industry research firm, estimated that the 300 securities firms and hedge funds that specialize in this type of trading took in roughly US$21 billion in profits in 2008.

Algorithmic and HFT have been the subject of much public debate since the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission said they contributed to some of the volatility during the 2010 Flash Crash, when the Dow Jones Industrial Average suffered its second largest intraday point swing ever to that date, though prices quickly recovered. (See List of largest daily changes in the Dow Jones Industrial Average.)

A July, 2011 report by the International Organization of Securities Commissions (IOSCO), an international body of securities regulators, concluded that while "algorithms and HFT technology have been used by market participants to manage their trading and risk, their usage was also clearly a contributing factor in the flash crash event of May 6, 2010."

Learn how U.S. private traders are using servers which they place near to the Wall Street stock exchange, and by using super-computers download information from Wall Street, such as share offers given out by Wall Street, and the customers trading with stockbrokers inside the Wall Street stock exchange. The private traders can then quickly buy up the shares which a Wall Street customer is looking at, and sell them to the customer before other customers have the chance to buy the shares direct from Wall Street itself.  It is done to make profit and is similar to cornering the market itself, and the U.S. Government claims to be trying to stop it.

Example of a High Frequency portfolio, as presented by Marcos Lopez de Prado during the QUANT CONGRESS USA,  July 12-14th 2011, New York.

High Frequency Trading has been around for a while but has been getting more attention since the unprecedented intraday U.S. stock market crash, known as the flash crash, on May 6th, 2010, when the Dow Jones Industrial Average dropped nearly 1000 points in a half hour before recovering in minutes. What is high frequency trading? VOA's Philip Alexiou reports.

 

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