The future of automated trading: round two - page 23
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Don't confuse the warm and the soft. And most importantly, don't argue against your own ideas. Firstly, no one has said that market participants must be absolutely equal. The implication is that they are equal in access to information, but not in the amount of funds. The classics naively assumed all investors to be rational, which is not the case and which only makes things worse. Secondly, no one has ever mentioned strong market efficiency. Today's markets exhibit a weak degree of efficiency. And even the increasing efficiency of markets, which can be objectively observed, leaves the market in the same phase of weak efficiency.
And the increasing efficiency is also due to robots from big companies. So for the big companies the markets will remain inefficient, just as arbitrage still exists for them. And for everyone else the markets will be efficient: no arbitrage, no TA, nothing systematic - just roulette.
1. Market participants will never have equal access to information, no matter what or who says;
(2) No one has really talked about strong market efficiency. At least based on the description "strong efficiency" is a purely theoretical, I would even say absurd thing (but the latter is my personal opinion, it could be wrong);
3. Today's markets are probably MEDIUM-EFFECTIVE (at least when viewed from the perspective of market efficiency theory).
Again, you are trying to evade the essence of calculations.
We are talking about deep tick history, not tick flow per day. And the tick history is exactly the volumes I have shown. Gigabytes per user at any request of an army of thousands of traders.
You are too far removed from practice, technology and economic feasibility. So you earned the "don't believe me" label to your posts a long time ago.
No i don't. you have shown this huge figure of the whole story. gigabytes, even terabytes. How often does a user need this amount of information? Does he have to download it every second or just download it once and that's it.
How come you don't need to download gigabytes of ticks to fill a trading hole (i.e., Internet connection interrupted for a couple of minutes)?
On so-called "market efficiency" from the perspective of the real economy.
The theme raised is rooted in the theory of market efficiency. From the point of view of economics, rather than the mathematical theory of the free flow of information, this theory rests upon the basic operating principle of the economic model of"pure capitalism". This is the principle of perfect competition. There are two necessary conditions for perfect competition to exist: first, there must be a large number of market players, and second, all market players must be approximately equal. Transferring these statements to the context of auto-trading, we have as participants a mass of trading robots trading on an equal footing, both in terms of their financial security and in terms of their access to information. No single market participant can create an edge in their favour because, firstly, they constitute only a tiny fraction of the competing forces, and secondly, they have access to information that is available to all. It is theoretical model, it is very simplified, there is no state regulation in it, And the stock-exchange price quotes are pure random walks.
I will try to ask again how market efficiency leads to random walk, even if only in theory? What is the logic behind the transition?
I take it that Timbo made the same point, meaning that efficiency will lead to random walk, which is roulette:
And for everyone else the markets will be effective: no arbitrage, no TA, nothing systematic - . one roulette..
I would be grateful to someone who understands this theory and can give a step-by-step breakdown on the fingers: everyone knows everything - ??? - SB market, for me the random wandering of an efficient market is like a devil out of the snuffbox. I understand how intuitively one wants to attribute this property to an efficient market, but logically there is no way.
I don't get it, what's the problem with the eSignal? Take eSignal and test all their work on real, unfiltered and honest ticks. Well if they don't want to do ticks, then you have to find another way for your work - eSignal, Gain and others. Why can't this be done?
Leonid, you probably won't believe this. But I personally do not have any problems with ticks, or volume, or the glass... I personally have it all.
We're talking about the future here, if someone doesn't have all that and I do. Who has the advantage?
The 4-digit (1.1234 instead of 1.12345) tick history will be very small in volume... And quite useful !
Another option is the second bar history ...
Leonid, you probably won't believe this. But I personally don't have any problems with tics or volume or glass...I personally have it all.
No one is going to destroy anyone. Just trying to profit from the strategy by many participants reduces the profitability of the strategy.
A simple example, the same arbitrage: sell a stock and buy a futures on it if the price is 2 sigmas apart - they will converge and there will be a good profit. But if many people want to buy at 2 sigma, obviously not enough for all, and the most cunning decides to buy at a divergence of only 1.5 sigmas, the profit is smaller but guaranteed because it is the first. Now everyone who waited for 2 sigmas has nothing, and someone decides that profit from the divergence of 1 sigma will be enough for him. And so it goes all the way down to the minimum barely covering transaction costs, when only the fastest and the "unhungriest" can use the strategy, and that is a robot in a large company. And all individuals go to hell... And so with any strategy.
It is the same with agriculture - more and more people are growing something on the balcony or in a pot on the windowsill. But what they grow has a casual nature, it is not a job - it is a hobby that brings more expense than profit. Only large farms are guaranteed to make money.
Imagine that the market is a stream of information, a river, a very abstract example, this river has a useful signal (possibility to make profit with mo > 0) and noise (mo is negative - due to commission). Robots will fish out all the useful stuff, and individuals will be left with a sea of noise.
Crowds of people go to casinos, many even win, some win a lot, but only casinos have mo > 0. The casino's income is systemic and the players' income is random.
On arbitrage I totally agree with you. The fastest pinging will push the margin to the limit at which the slow pinging will die out. That's right, arbitrage wars are seen to me as wars of big players close to the market. Every day there are more and more of these big and close to market players, as even for them the organisational barriers are getting smaller and smaller. Speeds are increasing, venues are getting bigger, and there is less and less arbitrage.
So if in the phrase "robots will finesse everything useful" the word "everything" refers to arbitrage strategies, then yes, of course, robots will grind up mountains of information faster than a human. But if the word "everything" includes non-arbitrage strategies, then I don't see a clear or obvious answer here. Putting aside marketing and, as Renat correctly pointed out, dusting the eyes of competitors, we find no direct evidence that big companies have non-arbitrage strategies with MO>0 at all. The facts, not the PR we have, indicate that gloriously promoted big funds drain as successfully as individuals. This indirectly indicates that they are trading martingale and do not have a strategy with MO>0. Sometimes it turns out that these funds with classified strategies are trivial pyramids. So in no way do I find that the big players' robots somehow threaten non-arbitrage strategies at all. The big players can only be created for the sake of scamming, for the high-paying positions, status and access that open up when managing large capitals, etc. goals and have nothing to do with non-arbitrage strategies with MO>0. And until there is no scientific justification for the impossibility of building such a strategy, until then individuals have a better chance than superbots. At least in proving the possibility or not.
In my opinion, tick data is not necessary for everyone. And it is not necessary for MT to have tick data - there are other platforms for that, as you correctly noted. And the competition between them will show how important tick data is for a trader ))))
Having the ability to use tick data does not mean having an advantage. The apparent advantage of being the first to enter the market does not mean that you will make more money than someone who enters later. The apparent advantage of being the first to enter the market does not mean that you will make more profit, it also means that you will be the first to take a bigger loss. In the financial markets the aim is not to gain an advantage, either in profit or loss, but to make more money. The goal is profit, not advantage. That is why it is not clear how this advantage and profit are connected.