I am one of those traders, and I'll happily share my observations. Before you ask -- no, there are no any good books and tutorials on HFT trading. You need to grokk it on your own, or receive the knowledge by direct transmission if you are an employee of HFT firm. However, there is "The Problem of HFT" by Haim Bodek, which contains some nice essays from the insider perspective and even some basic examples, though too specific within US equity markets.
All trading data is free and public, most traders are not sophisticated enough, you can start as small as you like being small is an advantage in HFT , lots of low-hanging fruit are to be picked.
HFT proliferation and arms race is barely started on most exchanges. HFT trading is mostly unrelated to arbitrage inter-exchange arbitrage is much slower, and it is a different discipline. Even more so with inter-exchange arbitrage. Most algorithms I came up with work perfectly well on small scale and running successfully in production , but I am not making any riches out of it yet. One thing I don't understand about the potential for crypto HFT is how to deal with the long transaction verification times.
With bitcoin, it can take a tx several mins to be verified on the blockchain. I've dabbled in bitcoin HFT for a few years, but am always stuck when it comes to this point.
There are a ton of arbitrage opportunities between exchanges, but the long transaction times are the equivalent of IEX's "speedbump. Actual trading is happening within exchanges with their own order matching engines, outside the blockchain. They are even slower, but they are not used for trading, only for funding and settlement. I wrote a bot but could never make money due to the transaction fees.
I wanted to make trades per day. Instead, had to limit it to 3 or 4, meaning a lot more burden on each trade to be right. The funnest part of writing a bot is using all the historical data to observe how the bot would have done during that period. I ended up checking thousands of permutations of parameters by brute force to determine the best ones, but in the end transaction fees killed me.
I didn't have the confidence to do it at a large enough scale to make money I guess. Making profits with fees is possible, but harder. Since the exchange functions as a market maker, do they also make money on the spread? Or is the Ask and Bid an exact match? Maybe there is no way to know for certain without two accounts.
Also do you trade on multiple exchanges to perform inter-exchange arbitrage or for some other reason? Market makers take a spread. They provide liquidity at a cost. An exchange doesn't have to take a spread but it is too tempting since it is easily hidden. Same experience here, several years ago. I'd love to know how professionals manage to avoid problems with transaction fees. I guess it is just taken into account during prediction, but it does seem to limit the number of tentative transactions you can make, even if you cancel them.
It's actually fairly simple: It does limit the number of potential profitable trades, and hence fees are sometimes used as a way for exchanges to reduce trading volume.
Or to divert it; some Chinese non-bitcoin exchanges for instance charge greater fees for intraday trading, to discourage speculation. Folks, is this really deserving the downvotes it receives? Parent is merely querying on his assumptions. Please, let's try to be kinder on these types of well meant and non-hostile comments. This is why it's important to wait and test your model against out of sample data.
That's a sure way to find a bad strategy. You end up doing the equivalent of overfitting. If you look at enough variables, the chance of there not being spurious correlations is basically zero, so you're guaranteed to land on sets of parameters that look good with historical data but fail going forward.
BickNowstrom days ago. The writing does not exclude proper backtesting. There is still the problem of the market not reacting to his trades. How do you handle counterparty risk?
Most your coin should be in wallets you control. Your profit margin should be transferred immediately to a cold wallet that your bot doesn't have keys too. Only move coin to an exchange when you for a transaction, and immediately extract it once the exchange is complete. Yes this forces your swaps to have a fairly non-trivial margin.
My API tool scrapes several exchanges. But every 24 hours I have to manually input which exchanges to actively consider swaps between. The goal of this is to avoid exchange bad news. Not in the slightest. Most my trading is re-enforcing the positions I already have monthly to avoid per trade costs. Most my investments boil down to 1. Mid-quarter purchasing if a silicon good ran into shortage issues not triggered by supply chain but demand.
Post announcement hype deflation bidding on products I feel will succeed, or will succeed for technical reasons. Connecting the dots on inter-coprate deals. X company buys fab plant from Y company.. The only internet companies worth investing in are monopolies. I have to ask They both had huge gains in the past year. By working with multiple exchanges, regular withdrawals my algos are limited by max usable inventory anyway , and being generally slightly paranoid.
However, counterparty risk is real, and if you can't afford it, it's better to not engage. I was doing this on the now defunct Cryptsy with the popular alt coins. Using relatively basic exponential moving average calculations. There just really wasn't enough volume to be doing it constantly. I was lucky to get a few trades in a day that made sense. I made money, and lost money. Mostly just a learning exercise.
At this point though, all of the big players are getting their hands in. Not really worth it anymore. Are you using some sort of leverage haven't heard about leverages for btc though? There is leveraged trading, but using the leverage exposes you to directional risk, and in HFT you want to have as little directional risk as possible: On OKCoin, my flagship algo generates more than trades per day and many more order placements. However, OKCoin is glitchy.
I'm struggling to reach half of this: Can you share a bit about it? Most of the exchanges including OKCoin are using cloud infrastructure. I place my instances in the same cloud and region meaning, the same datacenter. If you reach trades per day, even on OKCoin, it usually means that you are well into HFT territory, at it is generally impossible to stay profitable any other way. I might not know something about other options, though. If I understand well, the arbitrage opportunities you are seeing, are seen by almost anyone.
Since I am a cofounder of a softwae development company in the cryptocurrency space, I am looking for new insights but not have experience in the HFT space. What were the most important problems you solved?
OKcoin endless errors in documentation and lack of sane reporting, using multiple channels for market data flow e. Losing days are rare about 1 in 2 weeks, with about the same average loss. I have survived multiple crashes and liquidity flight events, including the Bitfinex mishap.
Is it HFT or algorithmic trading? In my view HFT is a based on arbitrage between exchanges. If so my experience is negative. The price fluctuations are too small to compensate for fees 0. HFT is quite rarely about arbitrage, in fact at least not directly.
I don't do arbitrage there are easier ways that I hadn't fully exhausted yet , but between e. The best way of dealing with the fees is not paying the fees. Why do you think there are no experts cornering the HFT potential gains? Way too small for any serious players working with "traditional" HFT. How do you handle taxes when you are buying and selling so much?More...