High frequency trading by algorithm is long passe, when everyone joins party it is a game of diminishing results. See the link below
http://m.us.wsj.com/articles/BL-DLB-27117
http://m.us.wsj.com/articles/BL-DLB-27117
M6 - Man, Mind, Money, Markets, Method & Madness
- Thread starter DSM
- Start date
Option.Trader
Thanks for the link,but please check the date of the article.This was posted in the year 2010.Moreover, these are the findings of two people,who ran simulations,not real trades.
Just because their research says algo trading is not profitable,doesn't mean FII's really do not use them.
When 300 Mil. dollars are spent to shave off .005 seconds to execute an order? Can we humans even comprehend physically how time is 0.005 seconds?
Are we even capable of executing an order at 4 times that speed which comes around 0.02 seconds or even 10 times the speed which is about 0.05 seconds?
All these questions themselves give the answer.
Thanks for the link,but please check the date of the article.This was posted in the year 2010.Moreover, these are the findings of two people,who ran simulations,not real trades.
Just because their research says algo trading is not profitable,doesn't mean FII's really do not use them.
When 300 Mil. dollars are spent to shave off .005 seconds to execute an order? Can we humans even comprehend physically how time is 0.005 seconds?
Are we even capable of executing an order at 4 times that speed which comes around 0.02 seconds or even 10 times the speed which is about 0.05 seconds?
All these questions themselves give the answer.
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Reflections on tactics and strategies from Sun Tzu’s Art of War - as can be applied to trading and understanding the market.
From Wiki : The Art of War is an ancient Chinese military treatise attributed to Sun Tzu, a high-ranking military general, strategist and tactician. It has had an influence on Eastern and Western military thinking, business tactics, legal strategy and beyond. It is listed on the Marine Corps Professional Reading Program and is recommended reading for all United States Military Intelligence personnel, and all CIA officers. (My note : During the Vietnam War, the ill equipped Vietcong officers studied The Art of War and used it to defeat the mighty US army. I have read this book many times - (it is available on Amazon for Rs. 140) it is simple, but deep, and is wisdom can be applied across many spheres of life. Some quotes summed up in a few words describe this wisdom that can be expounded in a full book or take a life time to learn, which I have taken up for reflection with explanation of my own understanding of it - as it applies to trading)
He who knows when he can fight and when he cannot will be victorious.
Explanation : Not necessary to be in the market at all times. Stay away if the trend or direction is not clear.
Know the enemy, know yourself; your victory will never be endangered. Know the ground, know the weather; your victory will then be total.
Explanation : The enemy – the opposite side : FII’s, DII’s and other traders. Yourself – the trader. The ground, weather – the market. Understanding of all three components that make up the market is necessary to make money in the market. Many traders trade with a strategy but apply it without understanding himself or the market conditions and so they lose time and again, not even knowing what is it that they are doing wrong.
He who is prudent and lies in wait for an enemy who is not, will be victorious.
Explanation : Patience to enter at the right time when the RR is favourable with good money management assures the trader will make make money consistently and over the long term.
The supreme excellence is not to win a hundred victories in a hundred battles. The supreme excellence is to subdue the armies of your enemies without having to fight them.
Explanation : Should a trader fight the market? Fight against the trend? It’s obvious - But many traders trade because of an AFL signal, or because they see that the ‘market has run up’ or may be taking a breather, or retrace a bit which they understand to be ‘a reversal signal’ The way to make money for a trader is to trade and pile on when the market is showing signs of weakness, and not signs of strength. Trading on the same side of the market is clearly logical. But it is the very opposite of this is what most traders end up doing, and lose money.
From Wiki : The Art of War is an ancient Chinese military treatise attributed to Sun Tzu, a high-ranking military general, strategist and tactician. It has had an influence on Eastern and Western military thinking, business tactics, legal strategy and beyond. It is listed on the Marine Corps Professional Reading Program and is recommended reading for all United States Military Intelligence personnel, and all CIA officers. (My note : During the Vietnam War, the ill equipped Vietcong officers studied The Art of War and used it to defeat the mighty US army. I have read this book many times - (it is available on Amazon for Rs. 140) it is simple, but deep, and is wisdom can be applied across many spheres of life. Some quotes summed up in a few words describe this wisdom that can be expounded in a full book or take a life time to learn, which I have taken up for reflection with explanation of my own understanding of it - as it applies to trading)
He who knows when he can fight and when he cannot will be victorious.
Explanation : Not necessary to be in the market at all times. Stay away if the trend or direction is not clear.
Know the enemy, know yourself; your victory will never be endangered. Know the ground, know the weather; your victory will then be total.
Explanation : The enemy – the opposite side : FII’s, DII’s and other traders. Yourself – the trader. The ground, weather – the market. Understanding of all three components that make up the market is necessary to make money in the market. Many traders trade with a strategy but apply it without understanding himself or the market conditions and so they lose time and again, not even knowing what is it that they are doing wrong.
He who is prudent and lies in wait for an enemy who is not, will be victorious.
Explanation : Patience to enter at the right time when the RR is favourable with good money management assures the trader will make make money consistently and over the long term.
The supreme excellence is not to win a hundred victories in a hundred battles. The supreme excellence is to subdue the armies of your enemies without having to fight them.
Explanation : Should a trader fight the market? Fight against the trend? It’s obvious - But many traders trade because of an AFL signal, or because they see that the ‘market has run up’ or may be taking a breather, or retrace a bit which they understand to be ‘a reversal signal’ The way to make money for a trader is to trade and pile on when the market is showing signs of weakness, and not signs of strength. Trading on the same side of the market is clearly logical. But it is the very opposite of this is what most traders end up doing, and lose money.
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DSM
There is a new book on this in the market,
The Art of War Applied to Wall Street by Y.K. Wong with Pat Kuzela and Revealing New Art of War Translation; Complete Strategy Guide for Investment (2010)
Have not read it but, you can get a preview of the book on Google books.
http://books.google.co.in/books?id=...epage&q=art of war applied to trading&f=false
There is a new book on this in the market,
The Art of War Applied to Wall Street by Y.K. Wong with Pat Kuzela and Revealing New Art of War Translation; Complete Strategy Guide for Investment (2010)
Have not read it but, you can get a preview of the book on Google books.
http://books.google.co.in/books?id=...epage&q=art of war applied to trading&f=false
A fantastic link for Sun Tzu's principles applied to Trading 
http://www.strategies-tactics.com/suntzu.htm
http://www.strategies-tactics.com/suntzu.htm
Was catching up on some reading. I came across this... it is astounding.
http://forextrading.about.com/od/basicforexrisks/a/riskreward_ro.htm
Excerpt :
Risk is a part of trading. Every trade carries a certain level of risk. Every trader must know the amount of risk that is being assumed on each trade. Knowing the amount of risk on each trade is one way to limit it and to protect your trading account. The best way to know your risk is to determine the risk-reward ratio. It is one of the most effective risk management tools used in trading.
Here are a few examples of the risk-reward ratio:
•If the risk is $200 and the reward is $400, then the risk-reward ratio is 200:400 or 1:2.
•If the risk is $500 and the reward it $1,500, then the risk-reward ratio is 500:1500 or 1:3.
•If the risk is $1,000 and the reward is $500, then the risk-reward ratio is 1000:500 or 2:1.
The minimum risk-reward ratio for a Forex trade is 1:2. However, a larger ratio is better. An acceptable risk-reward ratio for beginning traders is 1:3. Any number below 1:3 is too risky so the trade should be avoided. Never enter a trade in which the risk-reward ratio is 1:1 or the risk outweighs the reward.
Many experienced trader will only enter trades in which the risk-reward ratio is 1:5 or higher. This requires that the trader wait for a trade with this ratio, but the reward is worth it. A higher risk-reward ratio is a good idea in case the trade does not make the anticipated price movement. However, if the trader uses a lower risk-reward ratio, there is very little room for smaller price movements and the amount of risk will increase.
The risk-reward ratio is an important risk management and trading tool. It is important for beginning traders to take the extra time to perform this task because it can help to minimize risk in every trade. Waiting for the right risk-reward ratio can take a long time. However, the benefits of waiting for a higher risk-reward ratio are worth the effort and patience. You will know your risk and know your potential profit. Most importantly, you will know whether the trade is worthy of your money.
http://forextrading.about.com/od/basicforexrisks/a/riskreward_ro.htm
Excerpt :
Risk is a part of trading. Every trade carries a certain level of risk. Every trader must know the amount of risk that is being assumed on each trade. Knowing the amount of risk on each trade is one way to limit it and to protect your trading account. The best way to know your risk is to determine the risk-reward ratio. It is one of the most effective risk management tools used in trading.
Here are a few examples of the risk-reward ratio:
•If the risk is $200 and the reward is $400, then the risk-reward ratio is 200:400 or 1:2.
•If the risk is $500 and the reward it $1,500, then the risk-reward ratio is 500:1500 or 1:3.
•If the risk is $1,000 and the reward is $500, then the risk-reward ratio is 1000:500 or 2:1.
The minimum risk-reward ratio for a Forex trade is 1:2. However, a larger ratio is better. An acceptable risk-reward ratio for beginning traders is 1:3. Any number below 1:3 is too risky so the trade should be avoided. Never enter a trade in which the risk-reward ratio is 1:1 or the risk outweighs the reward.
Many experienced trader will only enter trades in which the risk-reward ratio is 1:5 or higher. This requires that the trader wait for a trade with this ratio, but the reward is worth it. A higher risk-reward ratio is a good idea in case the trade does not make the anticipated price movement. However, if the trader uses a lower risk-reward ratio, there is very little room for smaller price movements and the amount of risk will increase.
The risk-reward ratio is an important risk management and trading tool. It is important for beginning traders to take the extra time to perform this task because it can help to minimize risk in every trade. Waiting for the right risk-reward ratio can take a long time. However, the benefits of waiting for a higher risk-reward ratio are worth the effort and patience. You will know your risk and know your potential profit. Most importantly, you will know whether the trade is worthy of your money.
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