Forex Robots: HF-Scalping EURUSD, AUDUSD.
Expires July 1, 2015.
Forex Robot (MT4 Expert Advisor) HF-Scalping is high-frequency fully automated trading strategy for MT4 platform, based on the price movement indicator and Keltner Channel Indicator. The robot not only analyzes the length of the minute candles (M1), but also the temporal characteristics of the formation of candles (the formation of High and Low). HF-Scalping Forex robot is sensitive for broker, and you need true ECN /STP account.
High-frequency trading - A computer-driven investment trading strategy that emphasizes high transaction volume, extremely short-duration positions, and rapid rule-based automated buying and selling. High-frequency trading is performed by computer algorithms, operated by investment companies that react to pre-specified market conditions to generate short-term profits.
Trading Examples.
Keltner Channel Explanation.
Keltner channel is a technical analysis indicator showing a central moving average line plus channel lines at a distance above and below. The indicator is named after Chester W. Keltner (1909–1998) who described it in his 1960 book How To Make Money in Commodities. This name was applied by those who heard about it from him, but Keltner called it the ten-day moving average trading rule and indeed made no claim to any originality for the idea.
In Keltner's description the centre line is a 10-day simple moving average of typical price, where typical price each day is the average of high, low and close,
The lines above and below are drawn a distance from that centre line, a distance which is the simple moving average of the past 10 days' trading ranges (i. e. range high to low on each day). The trading strategy is to regard a close above the upper line as a strong bullish signal, or a close below the lower line as strong bearish sentiment, and buy or sell with the trend accordingly, but perhaps with other indicators to confirm. wikipedia. org.
Live account monitoring 1.
Live account monitoring 2.
Trading Result Analysis by currency.
AUDUSD.
Risk of Run Analysis.
Limited time offer.
Forex Robot HF-Scalping.
1 JForex and 1 MT4 License.
Price: $1100.
Price: $491.
one time payment free support Money back guarantee: 30 days.
Please note that foreign exchange and other leveraged trading involves significant risk of loss.
It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary. Read full disclosure.
NLT High Frequency Day Trading Mentorship.
You found an incredible trading-system, which constantly adopts to market changes and provides frequent, high probability trade-entries and exits: All visible on the NLT-Chart.
NLT HF Day Trading is for people, who are serious about making money from the financial markets with: Stocks and their Options, Futures and FOREX. For Beginners and Pro’s!
Crude Oil Futures: NLT-HF-Momentum-Indicator and End-of-Purple-Zone Indicator: 10-Minutes/Candle.
В В В В В В В В В В В В В В В.
Our featured day trading system contains 18 indicators measuring price, volume and volatility changes to provide us with high probable trade opportunities.
NeverLossTrading runs on a free trading platform and allows you to spot institutional price moves on all time frames, for you to trade along with them.
This is what you will get when signing up for the NeverLossTrading HF Day Trading Mentorship:
NeverLossTrading runs on a free trading platform and allows you to spot institutional price moves on all time frames, for you to trade along with them.
This is what you will get when signing up for the NeverLossTrading HF Day Trading Mentorship:
Software В В В В В В В В В В В В В В В В В В В В В В В.
With the launch of NLT HF-Day-Trading, you can now choose or combine two NLT Trading Systems:
NLT Income Generating: Trend focused NLT HF-Day-Trading:В В В В В Momentum focused.
Read off the chart what is going on and take advantage of it:
NLT Income Generating Chart.
Find high frequent and high probable trade proposals right on the chart.
Trade Multiple Asset Classes for high returns. Receive frequent updates on selected: Stocks. Stock Market Indexes. Commodities. Currencies. Treasuries. Learn how toВ build trades with their derivatives: Futures. Options Find clearly defined entries, exits and stop levels in our NLT HF-Day-Trading-Reports, which we send to you at least 3 times per week.
Step up your trading by seeing on the chart what is going on and how you can benefit from this knowledge. В.
You will no more be dependent on “expert” recommendations, personal or fundamental assumptions. In no way will your trading depend on European developments, the election, or the economic outlooks. Our reports, studies and Indicators follow the footprint of institutional investors and spell out highly probable trade proposals right on the chart, for you to trade along.
We are happy to give you a personal, interactive introduction to the “Never Loss Trading High Frequency Day Trading Mentorship”: contactNeverLossTrading , which will reveal everything from.
Why some of the most successful investors in our community are so eager to use "NeverLossTrading". to how you can beat the best Day Traders of the world -- no matter what the market does. to how to protect a position if the trade runs against you, turning potential losers into winners. В.
Please continue reading to experience the details and opportunities the NLT High Frequency Day Trading Mentorship can provide for you.
Never Loss Trading.
P. S. Find more details about the program below!
1 Introduction to NLT HF-Day-Trading.
Day-trading can involve a wide variety of instruments to produce income. You will learn how to trade assets, which are in favor for day trading setups:
Selected Stock and Selected Options. Stock Market Index Futures and Options. Currencies: Futures and FOREX Commodity Futures. Treasuries Futures.
Our trading system works on all time - or tick frames, however, we will share with you preferred chart setups to help you reducing noise and counter trend trade activities.
The “NLT High Frequency Day Trading Program” works as a standalone concept or can be combined with the NLT Income Generating Program.
“Trading is complicated, if you trade what you think,
it is not when you trade what you see : Never Loss Trading paints it on the chart”.
The program includes frequent reports on identified price moves and trading opportunities.
The NLT HF-Indicator (High Frequency Trading) identifies institutional price moves early and on all time periods.
It spells out clearly defined trade entry and exit targets right on the screen.
Confidentiality Notice: The information contained in this message may be confidential or privileged and exempt from disclosure under applicable law. If the reader of this message is not the intended recipient, an employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any disclosure, dissemination, distribution or copying of this communication is strictly prohibited. If you received this communication in error, please immediately notify the sender of your inadvertent receipt and delete this message from all data systems. В В В В В В В В В В В В.
Disclaimer: All our publications are designed to provide accurate and authoritative information in regard to the subject matter covered and shared with the understanding that the publisher is not engaged in rendering legal, financial advice, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. We advise all readers that it should not be assumed that present or future performance would be profitable or equal the performance of our examples. The reader should recognize that the risk of trading securities, stocks, options, futures can be substantial. Customers must consider all relevant risk factors, including their own personal financial situation before trading. In our teaching of NeverLossTrading, in our books, newsletters, webinars and our involvement in the Investment Clubs, neither NOBEL Living, LLC, the parent company of Never Loss Trading, nor any of the speakers, staff or members act as stockbrokers, broker dealers, or registered investment advisers. We worked out trading concepts that benefit us greatly and share them through education with our readers, members and clients. В В В В В В В В В В В В В.
With NLT High-Frequency-Day-Trading, we participate in the constant changes of the markets by receiving frequent trade signals to the up - or downside to trade them on various time frames.. В.
The proposed trade-entry is one to 2-ticks above or below the spelled-out entry price. В.
The NLT HF-Day-Trading Program Covers:
Specifically selected stocks for day trading. Selected Stocks and their options for day trading. Futures FOREX.
We use algorithmic adaptation models to spell-out proposed trade-entries and only enter a trade, when the spelled-out price threshold is surpassed.
Which trading instrument is on the move?
Besides teaching you how to trade with NLT-Strategies, you will receive multiple reports per week, where we communicate directional opportunities of selected assets:
Options.
Selected Stock Indexes.
Options.
Options.
FOREX.
The list of instruments fulfilling NLT-HF-Day-Requirements is constantly monitored and adjusted.
When you sign up for our NLT HF-Day-Trading Mentorship, the first three months of our reports is included. If you want to receive the NLT HF Day Trading Alert after, a monthly fee of $195 will be charged.
Your report includes shares, which carry NLT HF-Signals; in addition, you receive a top-down sector analysis:
S&P 500 and Sector Development.
Splits the S&P 500 into major industrial sectors.
Share of the total S&P 500.
Move Close to Close.
Daily price development in percent.
Net Change Direction.
Increased prices: Up. Decreasing prices: Down.
Actual price development in relation to the expected daily price move: SPU (Speed Unit). A measure of 40% expresses that the price move of the observed segment was 40% of the expected price move for the day.
Relates the sector move to the overall market move and marks with attention, sectors which had a bigger than overall market move. In the example above, each sector is highlighted. The overall market basically had no move as result of some sectors moving slightly up and others slightly down.
This measure is based on the last hours of the trading day, indicating a potential tendency for the next day opening of the market.
Here, we measure short-term directional price changes: Trends in a trend. New Up or New Down identifies a change in momentum. H up and HF down, identify trading opportunities. Up or down a continuation of the momentum.
Measuring the trend of the market and sector. New Up or New Down signifies a change in the trend, while up or down indicates the stage of the trend.
Light Tower and Power Candles identify significant price moves. Power Tower highlight NLT Top-Line signal trading opportunities. Light Towers a significant price move, which needs confirmation by another NLT signal to identify a trading opportunity. В.
The NLT-Purple-Zone-Indicator measures price consolidation zones, which usually happen prior to a price move. These zones are characterized by opposite price moves and we mostly trade when the end of the zone is indicated, and do not trade while it is indicated.
A measurement for a change in volume, identifying institutional involvement.
Price change goes hand in hand with a change in volatility. Strong up or Strong down identify trade potentials indicated by the NLT Comparison Study. Breakout shows a strong move of volatility, which can be associated with a price breakout. Trend, highlights when a volatile price move is followed through and continued.
How to Read the NLT Sector Analysis.
Overall strong market turned into an uptrend on a 1-SPU move. В The underlying tendency for the overnight session is to the up-side. Strongest Sector: Healthcare and Consumer-Discretionary. Weakest Sector: Utilities.
1.2В How to Identify Day Trading Opportunities.
You will learn and apply key reference time frames for:
Directional Trading: В В В Associating a strong directional price move. Channel Trading: В В В В В В Expecting a range bound price moves with defined reversal points. Reversal Trading: В В В В В Participate in low risk, high reward, reversal-point trades.
If you want to day trade stocks and their options, SEC regulations require account holdings above $25,000. To participate in Futures trading, a margin account is required. FOREX trades are based on the regulations of the individual broker used.
For all securities selected, we a defined analysis was conducted to assure:
High volume, for easy entry and exit. Minimum expected price moves. Preferred option and futures constellations. В.
NLT HF-Day-Trading is based on a specific set of indicators, which follow the general principles of Never Loss Trading. The NLT-HF-Indicators work wonderful in conjunction with all other NLT-Indicators and concepts.
Trade Entry Signals are spelled out in three different colors:
Dark-Green: В В В В В В В В В В В В В NLT HF-Signal, where we trade for a minimum of a 1-SPU price move.
Light-Green: В В В В В В В В В В В В NLT Volume-Differential-Signal, where we trade for a minimum of ВЅ-SPU.
Pink-Signal:              Signifying top and bottoms, where we prepare to trade for > 2-SPU’s.
The signs above are part of the NLT HF-Opportunity report as additional readings besides the powerful signals we focus on with the NLT HF-Concept:
To get a good reading of the overall price direction of a security, we usually put multiple reference time frames side by side. В.
Chart: Multiple Time Frames Observed for the S&P E-Mini Futures Index.
NLT High-Frequency-Targets: “Dark-Green” and “Purple” Price Indication.
Entry + 1-SPU, or the next NLT Price-Gravitation-Line.
The NLT-HF-Target-Price-Level is painted on the chart by a dark-green dot, while it is important to consider Price-Gravitation - and Support/Resistance-Lines.
Red NLT Double-Decker-Line on same directional trades.
Green NLT Double-Decker line at opposite facing trades.
Gray NLT Box-Line.
Above the prior high/low of the trade initiating candle.
NLT High-Frequency-Targets: “Pink” Price Indication on the Chart.
Trade-Targets for “Pink” Price Indications.
“Pink-Signals” are not made to stay on the chart like the “Dark-Green-Signals”, they are an early indicator in relation to the overall NLT-Channel-Trend and require confirmation.
When confirmation is given, Pink-Signals allow high probable 2-SPU trades with limited risk. В.
NLT Volume Differential Indicator (light green)
The NLT Volume Differential Indicator shows directional trade potentials, highlighting the exit price level with a light green dot, It is from now on integrated in the HF-Indicator-Study.
Light Green Indicator TradingВ В В В В В В.
Entry + 1/2-SPU, or the next NLT Price-Gravitation-Line.
The NLT-HF-Volume-Differential-Price-Level is painted on the chart by a light-green dot, while it is important to consider Price-Gravitation - and Support/Resistance-Lines.
Red NLT Double-Decker-Line on same directional trades.
Green NLT Double-Decker line at opposite facing trades. В.
Above the prior high/low of the trade initiating candle.
Expected exit after three time-units/bars.
In the actual NeverLossTrading chart, all three indicators are combined and put on the chart together for high probable and high precision trading:
The NLT-HF-Trading, complements the NLT Income-Generating Program.
The lower studies used in “NLT Income Generating”, and the referring trading plans are not part of the “NLT HF-Package”. They are taught and provided as an individual mentorship program. The same accounts for:
“NLT Top-Line”, “NLT Wealth Building”, “NLT HF-Stock-Trading”,
Vice-Versa, NLT-HF-Indicators are not included in any other NLT-Mentorship programs.
Our indicators point out changes in price direction. However, what to do if a trade goes against you: Capital preservation is important. As part of our mentorship, we will dedicate ourselves to train you on methods of how to turn potential losers into winners.
and you will see how NLT HF-Trading works and what it can do for you. В.
We take pride in your success,
В Never Loss Trading.
Trade a set basket of securities and their options: High leverage, limited risk. Operate your own opportunity scanner.
Following our buy and sell strategy, we trade on high frequency price changes. Take your trades from our reports or right from you charts.
Learn how to trade of a selected basket of stocks and their options. Protect and leverage your investments. Focus on constant monthly and weekly returns.
Learn how to day trade Futures and Options. A class in particular liked by people who want to make daily income with trading. A new and highly valuable trading concept, even for the advanced market investor . Click here .
Learn how to day trade Stock and their Options, Index-, Commodity-, Treasury-, Currency-Futures and FOREX Pairs. A class for day traders who are serious about making money from the financial markets. Click here .
After you participated one of our mentorship programs, we offer you to join our communication network as a member, with online investment discussion forums, newsletters, webinars, education.
Find a write up about NeverLossTrading, our concept, indicators and the different education programs we offer by clicking here…. or schedule a introduction with us: contactNeverLossTrading.
How to experience or join ?
Sign our VIP introduction:
Participate in our webinars where we will discuss the different trading strategies for the upcoming week.
Treat trading as a business: prepare your mind, set you own goals, execute NeverLossTrading, attain set returns, reach your financial goals.
The risk of trading securities, options, futures can be substantial. Customers must consider all relevant risk factors, including their own personal financial situation before trading. In our teaching of how to trade the markets, in our newsletters, webinars and our involvement in the Investment Clubs, neither NOBEL Living, LLC, the parent company of Never Loss Trading, or any of the speakers, staff or members act as stockbrokers, broker dealers, or registered investment advisers. We worked out trading concepts that benefit us greatly and share them through education with our members and clients.
High Frequency Trading – The Hidden Dangers of Scalping & Day trading.
Updated: September 21, 2017.
Almost invariably, when people first discover Forex, they are drawn to high frequency trading.
It’s the hottest topic in most chat rooms and forums, and it’s promoted heavily by brokers (so it must be legitimate, right?) Not to mention, it appeals to the adrenaline-addicted aspect of our own personalities.
Let’s be honest, it’s what we want to do because it’s fun, at least initially. Traders are attracted to fast-paced systems because they want immediate gratification and believe that with the promise of lots of trading opportunities – comes the promise of getting rich quick.
If you’re thinking about taking on a high frequency trading system or have already been using this method of trading, do yourself a big favor and read this article.
I am going to tell you why I think that scalping/day trading or any other high frequency trading strategy is not only an extremely risky way to trade Forex (financially), but could also have serious negative side-effects on your health and happiness.
The intensity of these trading systems can turn you into a non-showering chart-staring vegetable; negatively impact your everyday life by encouraging you to neglect your other responsibilities such as holding a job where you actually do earn money, or spending time with your spouse and children; and it can be especially dangerous psychologically, because if you blew your savings trying to get rich off of a ‘sure thing’, it may even have you contemplating suicide.
The Attraction of High Frequency Trading.
The whole idea of high frequency trading is to open positions for only a very short amount of time, sometimes just a few seconds. This intense in-and-out trading is the ‘excitement’ fresh new traders are looking for.
Even if they are only lucky enough to walk away with breadcrumbs, it’s still a hell of a thrill ride. You can remember when you first started trading, right? All you wanted to do was sit in front of the charts all day and take as many trades as you could. Consider this: How much analysis and thought could you possibly have been putting into your trade decisions?
Were you recording your trades in a journal where you could reflect on and analyze your wins and your losses? Were you using a stop loss? Were you careful to not overexpose yourself by taking several trades at once? If you answered negatively to these questions, you are participating in risky behavior.
We’ve all been there at some point, but eventually the initial buzz wears off. The trader starts getting more serious and begins to focus greatly on actually earning money.
Unfortunately the trader is still ‘conditioned’ to that high frequency trading mentality. It can be a vicious cycle to break free from because no one likes to admit defeat, no one wants to accept that what they have been doing isn’t working.
Sooner or later, traders engaging in high frequency trading strategies will realize they’re flogging a dead horse. The truth is that the high frequency trading approach to the market just doesn’t work.
Trader Burnout.
High frequency trading, particularly scalping, requires you to spend many hours glued to monitors tracking the minute by minute movement.
If you go for a toilet break, or the kitchen to grab a coffee/something to eat, you may miss out on the trading opportunity you’ve been staring at the charts for the last 3 hours waiting for. #frustrating.
Sitting in front of the charts for too long is mentally taxing and will even affect you physically.
Personally, I’ve had enough after looking at charts for more than 30 minutes. The thought of spending extended amounts of time in front of them, keeping track of minute price-movements non-stop, makes me uneasy.
Your mind can only take so much. How long can you sit in front of charts and remain mentally focused?
How long before you get tired and start making bad trading decisions? What is the threshold where boredom kicks in and you start forcing trades just to make something happen? Trades should only be opened when the probabilities are in your favor, not because you need mental stimulation.
Small Room for Error.
High frequency trading systems generally have very small profit targets. Making decent returns for the day requires the high frequency trader to accumulate a disturbing amount of profitable trades to ensure their efforts are worth it.
Most high frequency trading systems encourage bad money management by exposing their account to an unhealthy amount of risk. Generally, a high frequency trading system requires you to risk too much for the small gains . The risk reward ratios are usually in the negative, a serious red flag in my books.
In fact, the losses are so much bigger than the wins that one losing trade can put you in a deep hole that’s very hard to climb out of.
For example, a high frequency trader might risk twenty pips to gain five pips. That’s a negative risk/reward ratio of 4:1. To put that in perspective, one losing trade will set a scalper back four risk-factors.
The scalper’s next four trades will need to be successful in order to get the account back to the ‘break even’ stage.
Of course, that’s assuming the same lot sizing is being used on all the trades. High frequency traders also tend to use irregular money management, probably due to the fact that decisions are made quickly and ‘on the fly’.
High frequency trading can go pear-shaped fast, it’s frightening. For one, the chances of your next four trades being successful are against you. The margin of error allowed in this example is only twenty pips.
That’s not much at all considering that the average day-to-day market volatility is three times greater than that. The market only needs to hiccup in the wrong direction and the trade is stopped-out. While the high frequency trader is trying to recover from losses, every single stop-out makes the hole, four risk-factors deeper.
To make a negative risk/reward system work, you must amass an overwhelming amount of winning trades over losing trades. Suffering a loss at any time is a huge setback.
The desperation and pressure builds immensely when high frequency trading strategies push accounts ‘into the red’. This starts to induce stress which grows into irrational and emotional Forex trading mistakes.
No high frequency trading system (or any trading system, in my opinion) is going to work in the long run unless the risk/reward ratios are in the positive.
If you’re risking twenty pips, then you should be aiming for at least forty pips in returns, not five. A positive risk/reward model of 1:2 allows you to lose half of your trades, but still make money in the long term. That’s why we are adamant about using positive risk/reward in our price action trading because you can’t win every trade, and no one expects you to. It’s critical to ensure that your winners outperform your losers.
No Stop loss.
Up to this point we’ve been assuming that high frequency trading strategies actually use a stop loss. I know most of them don’t, because the stops generally required are so tight that any tiny vibrations in the market will knock-out the trade.
These kinds of vibrations are the result of normal day-to-day activity in the market, such as when large commercial businesses perform overseas currency transactions that contribute to day-to-day volatility.
I’ve noticed most high frequency traders will blame these ‘abnormal’ intra day price movements on their broker trying to ‘stop hunt’ their trade.
So, to beat the market and their broker, they don’t set one.
We are huge believers of stop losses here at The War Room, we never place a trade without one. With no stop loss, your account is effectively 100% exposed.
I know most high frequency traders are running on the highest leverage possible for their account. One unexpected news release could drive their over-exposed account into a margin call.
Failing to use a stop loss is not smart trading; I can’t think of any real advantage of not using one. Your stop loss should be placed at the point which if price were to cross, the trade would be considered a failure and you should no longer be in the trade anyway.
Having no stop loss means that you have to sit at the screen constantly monitoring your trade and decide when to manually close it. High frequency trading approaches also run the risk of getting caught up in re-quote errors when the market is experiencing increased volatility. Have you ever tried to exit a trade during intense periods of volatility?
It’s not a position you want to put yourself in. The bottom line is, sitting and staring at price charts all day/night is not a healthy behavior and is going to lead to anxiety issues, and not using a stop loss is just crazy!
High on Emotion.
High frequency trading systems are very emotionally-fueled ventures and attract those looking for a massive adrenaline rush. Short-term traders can be so disconnected from discipline that many of their trading decisions are just based off of ‘gut-instinct’.
With each new position opened, there is a lot at stake for such minute profits. High frequency trading methods can put a high level of importance on each trade. Traders become highly fixated to the success of one position. Why? simply because the loss becomes too much of a hit to take. I’ve seen high frequency traders who hold positions open at -100 pips; because they are waiting for the market to turn around and hit their 5 pip profit target.
When a losing trade is finally closed, guess what usually comes next? The revenge trade. This is often another bad trade involving the same pair (all while holding a grudge and believing that you’re going to ‘get your money back’). This is the definition of losing your cool and trading emotionally, I see it all the time. The constant chasing of price and running high on emotions, gives a trader the mind-set that they’re ‘fighting the markets’.
What is really happening is that they’re riding high on adrenaline and endorphins. Even when the trader is failing miserably, nothing else matters to them! It’s like an addiction to drugs. These guys know it’s detrimental to their wallet and their quality of life, but they still continue with the same behaviors and chase that rush.
It’s common knowledge that emotions and trading create quite a dangerous cocktail. You’re not doing yourself any favors by using a high frequency trading system that can easily amp up these emotions to destructive levels. The market takes no prisoners. When a trader breaks under pressure and shows their emotional cards, the market will exploit these emotions and play them against the trader.
Over Trading.
High frequency trading is one of the most demanding of all the trading styles. Most traders are unhappy with the amount of money they are making compared with the unlimited money making money potential of the market. So, they believe they can remedy this problem by simply trading as much as they can. This is one of the driving forces behind the attraction to high frequency trading strategies.
Over trading is a massive problem for short-term traders. If they’re already opening and closing trades at high frequency, what’s another trade or two, what’s another twenty? This encourages the gambling mindset when the trader is no longer thinking probabilities, but trading purely from greed, boredom, desperation or overconfidence. Your attitude towards the market is going to define you as a trader. You think you’re chasing money, but in reality, the only thing you’re chasing is your own tail.
Analysis Paralysis.
Most short term – high frequency trading system templates I’ve seen are quite heavy on the indicators. Quite a few of them actually require you to monitor multiple time frames at once. I know those images of multiple trading screens, flashing Forex indicators and rolling price feeds looks exciting to the new trader, but it’s far from practical when it comes to your trading performance.
More data or more analysis will NOT create more of an ‘edge’ for you in the markets. In fact, it will do quite the opposite. All the extra variables you bring onto your charts are only going to make it harder for you to execute clear-minded, logical trading decisions.
Frequently, your precious ‘chosen variables’ will conflict with one another, so even though you don’t realize it at the time – you’re creating your own trading nightmare by trying to incorporate all of these things into your analysis.
This is why we are such big fans of trading with price action on naked price charts. The clarity you get is unmatched by any other trading system, and that’s why it is the most successful trading methodology in this industry .
Conclusion.
There is one winner out of all this, and that’s your broker. Brokers benefit from high frequency trading so greatly, that they will even pressure you to do it. Brokers earn spreads on each trade you place, regardless of whether it’s a winner or a loser. So, yes they want you to be a high frequency trader. They want us all to be high frequency traders!
The truly sad thing here is, the broker will sometimes earn twice the amount from a trade that the high frequency trader does. Swing traders, like us War Room Traders, don’t have to worry about spread. Even an expensive spread like 10 pips, is not going to affect a trade very much, when it has an expected return of 150 pips.
Despite what you read in the trading forums, high frequency trading does not by any definition offer the means to a smooth, risk-free path to greater profits. It’s very demanding mentally and physically, takes up large amounts of your time and can have a negative impact on your life. In our article: do 95% of traders lose money?, we show evidence that the majority of losing traders are in fact the traders using high frequency trading strategies.
If you’re sick of being bombarded with the false promises that high frequency trading systems make, or maybe you just have real-life commitments, like a full time job, which wouldn’t allow you to engage in high frequency trading – you should take a serious look at our end of day trading strategies. These swing trading strategies use price action and demand a fraction of the chart time per day. In fact, you should be trading much less while generating larger returns and experiencing a far greater rate of success.
Before you start trading with real money make sure you check out our Forex trading checklist. Also, remember: scalping, day trading or any other high frequency strategy may appear as ‘smart investing’ in advertisements, but it’s only clever wording that is designed to target your emotions and encourage you to hand over your hard earned money.
I hope today’s article has highlighted the dangers of high frequency trading. If you enjoyed the article please help us spread the word and share the article using the buttons below. I wish you a profitable trading week.
Forex junkie & price action trading specialist!
Here I share my knowledge & experinces with technical strategies, focusing on swing trading, and breakout trading.
I am also obessed with trading psychology, and my new area of research - data mining & quantitative analysis.
Jesse Spaulding.
How I made $500k with machine learning and HFT (high frequency trading)
This post will detail what I did to make approx. 500k from high frequency trading from 2009 to 2010. Since I was trading completely independently and am no longer running my program I’m happy to tell all. My trading was mostly in Russel 2000 and DAX futures contracts.
The key to my success, I believe, was not in a sophisticated financial equation but rather in the overall algorithm design which tied together many simple components and used machine learning to optimize for maximum profitability. You won’t need to know any sophisticated terminology here because when I setup my program it was all based on intuition. (Andrew Ng’s amazing machine learning course was not yet available - btw if you click that link you’ll be taken to my current project: CourseTalk, a review site for MOOCs)
First, I just want to demonstrate that my success was not simply the result of luck. My program made 1000-4000 trades per day (half long, half short) and never got into positions of more than a few contracts at a time. This meant the random luck from any one particular trade averaged out pretty fast. The result was I never lost more than $2000 in one day and never had a losing month:
( EDIT : These figures are after paying commissions)
And here’s a chart to give you a sense of the daily variation. Note this excludes the last 7 months because - as the figures stopped going up - I lost my motivation to enter them.
Prior to setting up my automated trading program I’d had 2 years experience as a “manual” day trader. This was back in 2001 - it was the early days of electronic trading and there were opportunities for “scalpers” to make good money. I can only describe what I was doing as akin to playing a video game / gambling with a supposed edge. Being successful meant being fast, being disciplined, and having a good intuitive pattern recognition abilities. I was able to make around $250k, pay off my student loans and have money left over. Win!
Over the next five years I would launch two startups, picking up some programming skills along the way. It wouldn’t be until late 2008 that I would get back into trading. With money running low from the sale of my first startup, trading offered hopes of some quick cash while I figured out my next move.
In 2008 I was “manually” day trading futures using software called T4. I’d been wanting some customized order entry hotkeys, so after discovering T4 had an API, I took on the challenge of learning C# (the programming language required to use the API) and went ahead and built myself some hotkeys.
After getting my feet wet with the API I soon had bigger aspirations: I wanted to teach the computer to trade for me. The API provided both a stream of market data and an easy way to send orders to the exchange - all I had to do was create the logic in the middle.
Below is a screenshot of a T4 trading window. What was cool is that when I got my program working I was able to watch the computer trade on this exact same interface. Watching real orders popping in and out (by themselves with my real money) was both thrilling and scary.
The design of my algorithm.
From the outset my goal was to setup a system such that I could be reasonably confident I’d make money before ever making any live trades. To accomplish this I needed to build a trading simulation framework that would - as accurately as possible - simulate live trading.
While trading in live mode required processing market updates streamed through the API, simulation mode required reading market updates from a data file. To collect this data I setup the first version of my program to simply connect to the API and record market updates with timestamps. I ended up using 4 weeks worth of recent market data to train and test my system on.
With a basic framework in place I still had the task of figuring out how to make a profitable trading system. As it turns out my algorithm would break down into two distinct components, which I’ll explore in turn:
Predicting price movements; and Making profitable trades.
Predicting price movements.
Perhaps an obvious component of any trading system is being able to predict where prices will move. And mine was no exception. I defined the current price as the average of the inside bid and inside offer and I set the goal of predicting where the price would be in the next 10 seconds. My algorithm would need to come up with this prediction moment-by-moment throughout the trading day.
Creating & optimizing indicators.
I created a handful of indicators that proved to have a meaningful ability to predict short term price movements. Each indicator produced a number that was either positive or negative. An indicator was useful if more often than not a positive number corresponded with the market going up and a negative number corresponded with the market going down.
My system allowed me to quickly determine how much predictive ability any indicator had so I was able to experiment with a lot of different indicators to see what worked. Many of the indicators had variables in the formulas that produced them and I was able to find the optimal values for those variables by doing side by side comparisons of results achieved with varying values.
The indicators that were most useful were all relatively simple and were based on recent events in the market I was trading as well as the markets of correlated securities.
Making exact price move predictions.
Having indicators that simply predicted an up or down price movement wasn’t enough. I needed to know exactly how much price movement was predicted by each possible value of each indicator. I needed a formula that would convert an indicator value to a price prediction.
To accomplish this I tracked predicted price moves in 50 buckets that depended on the range that the indicator value fell in. This produced unique predictions for each bucket that I was then able to graph in Excel. As you can see the expected price change increases as the indicator value increases.
Based on a graph such as this I was able to make a formula to fit the curve. In the beginning I did this “curve fitting” manually but I soon wrote up some code to automate this process.
Note that not all the indicator curves had the same shape. Also note the buckets were logarithmically distributed so as to spread the data points out evenly. Finally note that negative indicator values (and their corresponding downward price predictions) were flipped and combined with the positive values. (My algorithm treated up and down exactly the same.)
Combining indicators for a single prediction.
An important thing to consider was that each indicator was not entirely independent. I couldn’t simply just add up all the predictions that each indicator made individually. The key was to figure out the additional predictive value that each indicator had beyond what was already predicted. This wasn’t to hard to implement but it did mean that if I was “curve fitting” multiple indicators at the same time I had to be careful; changing one would effect the predictions of another.
In order to “curve fit” all of the indicators at the same time I setup the optimizer to step only 30% of the way towards the new prediction curves with each pass. With this 30% jump I found that the prediction curves would stabilize within a few passes.
With each indicator now giving us it’s additional price prediction I could simply add them up to produce a single prediction of where the market would be in 10 seconds.
Why predicting prices is not enough.
You might think that with this edge on the market I was golden. But you need to keep in mind that the market is made up of bids and offers - it’s not just one market price. Success in high frequency trading comes down to getting good prices and it’s not that easy.
The following factors make creating a profitable system difficult:
With each trade I had to pay commissions to both my broker and the exchange. The spread (difference between highest bid and lowest offer) meant that if I were to simply buy and sell randomly I’d be losing a ton of money. Most of the market volume was other bots that would only execute a trade with me if they thought they had some statistical edge. Seeing an offer did not guarantee that I could buy it. By the time my buy order got to the exchange it was very possible that that offer would have been cancelled. As a small market player there was no way I could compete on speed alone.
Building a full trading simulation.
So I had a framework that allowed me to backtest and optimize indicators. But I had to go beyond this - I needed a framework that would allow me to backtest and optimize a full trading system; one where I was sending orders and getting in positions. In this case I’d be optimizing for total P&L and to some extent average P&L per trade.
This would be trickier and in some ways impossible to model exactly but I did as best as I could. Here are some of the issues I had to deal with:
When an order was sent to the market in simulation I had to model the lag time. The fact that my system saw an offer did not mean that it could buy it straight away. The system would send the order, wait approximately 20 milliseconds and then only if the offer was still there was it considered as an executed trade. This was inexact because the real lag time was inconsistent and unreported. When I placed bids or offers I had to look at the trade execution stream (provided by the API) and use those to gauge when my order would have gotten executed against. To do this right I had to track the position of my order in the queue. (It’s a first-in first-out system.) Again, I couldn’t do this perfectly but I made a best approximation.
To refine my order execution simulation what I did was take my log files from live trading through the API and compare them to log files produced by simulated trading from the exact same time period. I was able to get my simulation to the point that it was pretty accurate and for the parts that were impossible to model exactly I made sure to at least produce outcomes that were statistically similar (in the metrics I thought were important).
Making profitable trades.
With an order simulation model in place I could now send orders in simulation mode and see a simulated P&L. But how would my system know when and where to buy and sell?
The price move predictions were a starting point but not the whole story. What I did was create a scoring system for each of 5 price levels on the bid and offer. These included one level above the inside bid (for a buy order) and one level below the inside offer (for a sell order).
If the score at any given price level was above a certain threshold that would mean my system should have an active bid/offer there - below the threshold then any active orders should be cancelled. Based on this it was not uncommon that my system would flash a bid in the market then immediately cancel it. (Although I tried to minimize this as it’s annoying as heck to anyone looking at the screen with human eyes - including me.)
The price level scores were calculated based on the following factors:
The price move prediction (that we discussed earlier). The price level in question. (Inner levels meant greater price move predictions were required.) The number of contracts in front of my order in the queue. (Less was better.) The number of contracts behind my order in the queue. (More was better.)
Essentially these factors served to identify “safe” places to bid/offer. The price move prediction alone was not adequate because it did not account for the fact that when placing a bid I was not automatically filled - I only got filled if someone sold to me there. The reality was that the mere fact of someone selling to me at a certain price changed the statistical odds of the trade.
The variables used in this step were all subject to optimization. This was done in the exact same way as I optimized variables in the price move indicators except in this case I was optimizing for bottom line P&L.
When trading as humans we often have powerful emotions and biases that can lead to less than optimal decisions. Clearly I did not want to codify these biases. Here are some factors my system ignored:
The price that a position was entered - In a trading office it’s pretty common to hear conversation about the price at which someone is long or short as if that should effect their future decision making. While this has some validity as part of a risk reduction strategy it really has no bearing on the future course of events in the market. Therefore my program completely ignored this information. It’s the same concept as ignoring sunk costs. Going short vs. exiting a long position - Typically a trader would have different criteria that determines where to sell a long position versus where to go short. However from my algorithms perspective there was no reason to make a distinction. If my algorithm expected a downward move selling was a good idea regardless of if it was currently long, short, or flat. A “doubling up” strategy - This is a common strategy where traders will buy more stock in the event that there original trade goes against them. This results in your average purchase price being lower and it means when (or if) the stock turns around you’ll be set to make your money back in no time. In my opinion this is really a horrible strategy unless you’re Warren Buffet. You’re tricked into thinking you are doing well because most of your trades will be winners. The problem is when you lose you lose big. The other effect is it makes it hard to judge if you actually have an edge on the market or are just getting lucky. Being able to monitor and confirm that my program did in fact have an edge was an important goal.
Since my algorithm made decisions the same way regardless of where it entered a trade or if it was currently long or short it did occasionally sit in (and take) some large losing trades (in addition to some large winning trades). But, you shouldn’t think there wasn’t any risk management.
To manage risk I enforced a maximum position size of 2 contracts at a time, occasionally bumped up on high volume days. I also had a maximum daily loss limit to safeguard against any unexpected market conditions or a bug in my software. These limits were enforced in my code but also in the backend through my broker. As it happened I never encountered any significant problems.
From the moment I started working on my program it took me about 6 months before i got it to the point of profitability and begun running it live. Although to be fair a significant amount of time was learning a new programming language. As I worked to improve the program I saw increased profits for each of the next four months.
Each week I would retrain my system based on the previous 4 weeks worth of data. I found this struck the right balance between capturing recent market behavioral trends and insuring my algorithm had enough data to establish meaningful patterns. As the training began taking more and more time I split it out so that it could be performed by 8 virtual machines using amazon EC2. The results were then coalesced on my local machine.
The high point of my trading was October 2009 when I made almost 100k. After this I continued to spend the next four months trying to improve my program despite decreased profit each month. Unfortunately by this point I guess I’d implemented all my best ideas because nothing I tried seemed to help much.
With the frustration of not being able to make improvements and not having a sense of growth I began thinking about a new direction. I ed 6 different high frequency trading firms to see if they’d be interested in purchasing my software and hiring me to work for them. Nobody replied. I had some new startup ideas I wanted to work on so I never followed up.
UPDATE - I posted this on Hacker News and it has gotten a lot of attention. I just want to say that I do not advocate anyone trying to do something like this themselves now. You would need a team of really smart people with a range of experiences to have any hope of competing. Even when I was doing this I believe it was very rare for individuals to achieve success (though I had heard of others.)
There is a comment at the top of the page that mentions "manipulated statistics" and refers to me as a “retail investor” that quants would “gleefully pick off”. This is a rather unfortunate comment that’s simply not based in reality. Setting that aside there’s some interesting comments: news. ycombinator/item? id=4748624.
UPDATE #2 - I’ve posted a follow-up FAQ that answers some common questions I’ve received from traders about this post.
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Hi, I'm Jesse, founder of Thinklab. I live and play in San Francisco. You've found my home on the web.. Welcome!
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