Posts Tagged ‘computer trading’

Schonfeld Fires 15% Of Traders, Blames Fast, Greedy Robots

Schonfeld Fires 15% Of Traders, Blames Fast, Greedy Robots

Courtesy of Tyler Durden at Zero Hedge 

The very special gift presented to 50 prop traders at Schonfeld Securities in advance of the celebratory July 4th holiday weekend… was a pink slip. The palliative reason given to these newly unemployed by founder Steven Schonfeld: it is all the fault of "black boxes, stat arb and high frequency trading." Welcome to the new paradigm – you are now all redundant. Only robots are allowed to trade with robots. But. But. We thought they only provide liquidity (er, viscocity – the specific gravity of motor oil is 0.8). Full letter below. 

‘On December 5, 1988 we started Schonfeld Securities. Very soon after, we started hiring prop traders, and many years later formed “Opus Trading Fund”.

Prop trading has always been and will always be an extremely important part of our business and certainly the one that is closest to our hearts. The best Schonfeld traders will always have a place to trade and the capital to maximize their earnings potential. We are committed to them and will always strive to provide an environment for them to succeed. Sadly, however, we are re-thinking the notion that less skilled and less successful traders can be here forever without producing sufficiently for themselves and the firm.

For over 21 years we have always done everything we could, with the traders’ best interests in mind, to provide careers and opportunities for our traders.

We have always cared more than you could imagine for your careers, happiness, well being and future.

We truly admired many of your passions for trading and for the markets. Over the years we have stood by you and you have stood by us as well. There has been real loyalty on both ends and don’t ever think we took your loyalty for granted for one second.

Bull and bear markets come and go. Good trading markets come and go. But unfortunately, our vision of the future of trading has changed. It is getting much tougher for traders to make a living or get by. The direct competition from black boxes, stat arb and high frequency trading which continues to grow at exponential rates is here to stay and has caused us to change our outlook for lesser skilled traders.

Based on the above competitive changes to the trading arena, we


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Fast-Reading Computers Are About To Drink Your Trading Milkshake

Fast-Reading Computers Are About To Drink Your Trading Milkshake

Courtesy of Tyler Durden

Milkshakes on countertop

Add speed reading to the set of mad skills that rich robotic algos are now much better at than humans. The latest craze among the computerized trading community is using Johnny 5 to read through thousands of press releases in combination with some fuzzy logic and the 80/20 rule, to trade stocks pronto, even as plain vanilla Homo Sapiens are still stuck on footnote 1. The WSJ reports that: "Researchers have been working on an artificial-intelligence computer program designed to mimic the way an analyst uses financial news. In simulated trading, the program beat the S&P 500, and when combined with quantitative stock-picking techniques, it saw a return on trades of more than 20%."

Unlike traditional number crunching methods to front run those armed with less than the latest SPARCs, this latest development will instead try to determine what the subtext of a given PR narrative is and trade it accordingly. It is unclear whether these programs are already in place, and whether they account for the almost universally wrong knee jerk reaction post any earnings and press release by public companies. We can’t wait for corporate counter-espionage divisions to reverse engineer these algos, and determine just what keywords and phrases set off Buy programs, and flood their press releases which announce 100% misses to expectations, yet result in flash dashes and inexplicably push stock prices up a few million percent. In other news, the market is now no longer about forecasting, predicting, and, generally, investing, but merely about being faster to frontrun/react/buy than your immediate competitor.

More from the WSJ:

To make stock predictions, the program does what is known as “text mining” — scanning large volumes of content and analyzing the words in it. Computer-aided quantitative funds already are plentiful, but they analyze numerical data rather than text. The new program is different because it attempts to simulate what has traditionally been a human activity.

“Our approach is more like the analyst approach, simulated by a program,” said Hsinchun Chen, director of the University of Arizona’s Artificial Intelligence Lab, in an interview with Digits. “You have an analyst reading papers, looking for clues that others have not observed.”

The program, which was first reported by MIT’s Technology Review, scans stock prices and financial news and buys


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Meltup “Abysmal Volume” Summer Approaches, Even As Americans Now Openly Shun Stocks

Meltup "Abysmal Volume" Summer Approaches, Even As Americans Now Openly Shun Stocks

Courtesy of Tyler Durden

As algos now focus exclusively on gaming the EURJPY and other funding currency pairs, the stock market is completely dead and trades purely as a correlation and hedging pair. With under two hours into the trading day, we are already at 40% below average volume: don’t be surprised to see a 5%, 15% or 50% market up move if we drop to below 50% of cumulative.

In other news, the LA Times reports that Americans, for the most part, have now officially said goodbye to stocks. With a broken market such as what is evident every single day, who can blame them. Bernanke has officially failed to lead the lemmings into a risky asset reflation, as primary dealers, HFT algos and mutual funds will need to take profits occasionally, and every time this happens we will see another, ever flashier crash.

The amount Americans have in basic savings accounts at banks and thrifts rose to a record $5.06 trillion at the end of May, a jump of $209 billion since the start of the year.

But even as bond portfolios now hold a record $2.4 trillion, individuals and institutions still sit with $2.8 trillion in money market mutual funds that pay next to nothing. The average annualized fund yield is a barely detectable 0.04%.

The world’s richest people, too, are hoarding cash. You might imagine that they got wealthy by taking risks, not by playing it safe with their money. But they’re playing it safe now: The annual Boston Consulting Group report on the world’s millionaires, issued this week, estimated that those households (there are 11.2 million of them) overall hold 48% of their financial assets in cash accounts, up from 44% in 2007.

We all know where to affix the blame for this state of affairs. In the wake of the world’s worst financial crisis since the Great Depression, and the devastation it wrought on stocks and real estate values, fear has triumphed over greed. For many investors, capital preservation now trumps all else.

Some large portion of the population that was comfortable in 2007 having, say 60% of their money in stocks, 30% in bonds and 10% in cash now has significantly lowered the amount allocated to stocks. Watching the market drop 50% in six months


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Black Swan in Computer Trading? Nasdaq to Cancel Some Trades; Plunge Raises Alarm on Computerized Trading

Black Swan in Computer Trading? Nasdaq to Cancel Some Trades; Plunge Raises Alarm on Computerized Trading

Courtesy of Mish 

Black Swans

Larry Leibowitz, the chief operating officer of NYSE Euronext says Electronic Trading to Blame for Plunge

Computerized trades sent to electronic networks turned an orderly stock market decline into a rout today, according to Larry Leibowitz, the chief operating officer of NYSE Euronext.

While the first half of the Dow Jones Industrial Average’s 998.5-point plunge probably reflected normal trading, the selloff snowballed because of orders sent to venues with no investors willing to match them, Leibowitz said in an interview on Bloomberg Television.

Plunge Raises Alarm on Computerized Trading

Inquiring minds are reading Stock plunge raises alarm on algo trading

A spine-chilling slide of nearly 1,000 points in the Dow Jones Industrial Average, its biggest intraday points drop ever, led to heightened calls for a crackdown on computer-driven high-frequency trading.

The slide, which in one 10-minute stretch knocked the index down nearly 700 points, may have been triggered by a trading error. Major stock indexes eventually recovered from their 9 percent drops to close down a little more than 3 percent.

But the follow-through selling that pushed stocks of some highly regarded companies into tailspins exacerbated concerns that regulators can quickly lose control of the markets in a world of algorithmic trading.

"The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today," Senator Edward Kaufman said in a statement.

"The battle of the algorithms — not understood by nor even remotely transparent to the Securities and Exchange Commission — simply must be carefully reviewed and placed within a meaningful regulatory framework soon."

Computers vs. Computers

In essence computers trading against computers decided at some point today to throw in the towel and not bid.

At some point (manual intervention?) they all decided to bid again, driving stock prices back up. This is what our stock market casino has become.

Lovely, isn’t it?

I have been waiting for this to happen and today it did. Supposedly, computer trading lowers volatility and bid/ask spreads for traders. Today we see that works until it doesn’t.

Most of the day Citigroup was erroneously blamed for the plunge. Citigroup was not to blame, flash-trading computers vs. computers with fake orders appears to be the culprit.

Who benefits from…
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Zero Hedge

US Foreclosures Rise For First Time In 36 Months

Courtesy of ZeroHedge. View original post here.

One month ago we discussed why according to the recent data, the "Housing Market Headed For "Broadest Slowdown In Years." Fast forward to today, when we received the latest confirmation that the US housing market appears to have recently hit a downward inflection point: according to the just released July 2018 U.S. Foreclosure Market Report released by ATTOM Data Solutions, foreclosure starts in July increased by 1% from a y...



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Phil's Favorites

Saudi showdown spotlights Canada's energy insecurity

 

Saudi showdown spotlights Canada's energy insecurity

Khalid Al-Falih Minister of Energy, Industry and Mineral Resources of Saudi Arabia, has said the diplomatic dispute won’t affect oil exports to Canada. (AP Photo/Ronald Zak, File)

Courtesy of Larry Hughes, Dalhousie University

In mid-August, Khalid al-Falih, Saudi Arabia’s energy minister, announced that the diplomatic rift with Canada wouldn’t affect the flow of Saudi crude oil to the Irving refinery in Saint John, N.B.

There are at least two reasons why this decision should ...



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ValueWalk

Whitney Tilson:Tesla Should Raise Money Now

By Jacob Wolinsky. Originally published at ValueWalk.

Excerpted from Whitney Tilson’s latest email to investors

1) As part of our seminar on How to Launch and Build an Investment Fund, we teach an in-depth module on how to create a first-class, compelling investor pitch deck, using multiple real-world examples (as we do with everything we teach). The first example is my own deck, which I think was at best a B – decent but a lot of room for improvement, as I discussed in our webinar earlier this month – here’s the video of it: https://player.vimeo.com/video/285653427 (8 min).

Pease use “VW10” for a discount!

If you find what we’...



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Digital Currencies

Stop worrying about how much energy bitcoin uses

 

Picture via Pixabay

Stop worrying about how much energy bitcoin uses

Courtesy of Katrina Kelly-Pitou, University of Pittsburgh

The word “bitcoin” is as likely to garner feverish excitement as it is glaring criticism. The financial community sees speculative promise in the form of trade that currently has little to no regulation. Meanwhile, others argue that it’s a distraction that detracts from the overall longevity of U.S. financial institutions.

Bitcoin’s energy consumption has become a recent talking point in the debate. ...



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Kimble Charting Solutions

Doc Copper down 20%, sending a macro message?

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

Doc Copper has had a rough go of it over the past 7-years and especially of late.

Since the highs back in 2011, Doc Copper has created a series of lower highs and lower lows.

Since the lows in 2015, it has experienced a strong rally, creating a series of higher lows, as interest rates and several commodities did the same.

In June Doc Copper may have created a double top at (1), as it was testing last years highs. Since hitting 2017 highs at (1), Doc Copper has declined nearly 20% in the past 10-weeks.

The decline now has it testing potential dual support at (2...



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Insider Scoop

Goldman Sachs: Newly Public Aurora Mobile Set To Gain Market Share

Courtesy of Benzinga.

Related 28 Stocks Moving In Monday's Mid-Day Session Benzinga's Top Upgrades, Downgrades For August 20, 2018 ...

http://www.insidercow.com/ more from Insider

Biotech

Approval of first 'RNA interference' drug - why the excitement?

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Approval of first ‘RNA interference’ drug – why the excitement?

Single strands of ribonucleic acid (RNA) are now being used to treat disease. By nobeastsofierce / shutterstock.com

Courtesy of Thomas Schmittgen, University of Florida

Small interfering RNA sounds like something from a science fiction novel rather than a revolutionary type of medicine. But this odd-sounding new drug of...



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Chart School

Weekly Market Recap Aug 19, 2018

Courtesy of Blain.

A good amount of volatility this past week, but once again indexes are just sort of hanging around as we work through some news items, specifically facing trade issues.  We ended last week with some hand wringing over Turkey – while nothing was really resolved, U.S. markets looked past that… however emerging markets continue their struggle.  The U.S. indexes have simply been range bound for weeks on end.

The Turkish central bank pledged in a statement Monday to provide “all the liquidity the banks need.” It also said banks would be able to borrow foreign-exchange deposits from the central bank at one-month and one-week maturities. Analysts said T...



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Members' Corner

There Are 3 Main Theories That Explain Trump's Approach to Putin and Russia-Which One Makes the Most Sense?

What do you think?

Thom Hartmann suggests that the "Manchurian Candidate theory" is the least likely explanation for Trump's pro-Russia behavior in "There Are 3 Main Theories That Explain Trump’s Approach to Putin and Russia—Which One Makes the Most Sense?" (below).  disagrees and suggests that Putin probably has "the goods" on Trump in "Trump’s Plot Against America". (To be fair, Hartmann acknowledges that his three theories are not mutually exclusive.) Jonathan Chait argues ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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