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Daytraders “exploit” flaw in trading algorithm

October 16th, 2010

This is interesting. Apparently it is not OK if the small guys take advantage of a big guys faulty algorithms. Good to know since the markets are being manipulated on a second to second basis by HFT firms frontrunning and flash trading. We have to be careful so that our trades doesn’t make the computers trade badly, because it isn’t supposed to loose. If it does it is clearly because it was manipulated. Come on, this is ridiculous. Clearly the algorithm used wasn’t tested enough before being put in production. Thank the Norwegian guys for finding the flaws and fix them, don’t take legal action like a sore loser.

Check it out: http://www.computerworlduk.com/news/security/3244186/norwegian-traders-convicted-for-outsmarting-us-stock-broker-algorithm/

I hope my trades never “cheat” a big players software so I get sued too…

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High-frequency trading

May 19th, 2010

We all know how big a share program trade take of the daily volume on NYSE and NASDAQ (Goldman Sachs stands for a huge part in itself). This article points out smaller firms off-Wall street that seems to be doing extremely well. At the same time that I’m fascinated by this topic I can’t help to feel that it really isn’t contributing to a fair and solid market where stocks are rewarded/punished for their real world performance. These guys say that they add liquidity to the market, but really, if you hold your positions for 11 seconds in average I think most would argue that the liquidity is artificial.

So, what I am trying to say is, I’m very jealous…

Even more reason to jump to gold?

March 24th, 2010

One of my favorite financial writers, Edward Harrison (of CreditWritedowns.com) made two very interesting posts today:

http://seekingalpha.com/article/195090-anticipating-eurozone-collapse

http://seekingalpha.com/article/195224-ten-ways-to-spot-a-bubble-in-china

Also J.S Kim made a post about the current focus on US vs China that was very interesting (Kim is very pro physical gold and silver and con fiat currencies):

http://seekingalpha.com/article/195097-in-the-real-world-series-of-poker-the-stakes-are-default-of-sovereign-debt

I must say that I am very terrified for the outcome for the Eurozone. I live in Sweden, we don’t have the € here (I personally voted against it as I didn’t trust the ECB), but of course we are going to be heavily affected anyhow. A lot of our exports are denominated in Euros as this intra-EU trade is very significant for Sweden. The same goes for all countries around the Eurozone (UK, Switzerland and so on). This in concert with the possible Chinese bubble and the possibility of a double dip in both US and EU sure doesn’t look good. If there is a bubble in China and it busts of course the resource producing countries like Australia, Brazil, Canada and Russia (and numerous others) will experience lowered export and price in many commodities like metals and oil will be effected.  The AUD is very strong today because the increase in Chinese import of resources from the continent.

If we have a failure in the Eurozone, a double dip in the stock markets globally, a bust in China and 1 trillion of petrodollars looking for alternative investments, what should one do? Buy gold I think. Clearly the central bankers think all problems are solved by printing more money (I got 1000 trillion of Zimbabwe dollars from a seller on Ebay for £15 last week. I  think it will look good framed on the wall above my desk.). China seems to understand that gold is the only currency that have survived the fall of great empires in the past for a reason. I think the Arabs are as smart and will shift their profits over to gold purchases (covertly of course).

Also, just a small remark. I have increasingly seen the word ‘endgame’ being used in articles the last few weeks. As a poker player I’m very familiar with this concept as the final phase in a multi table tournament, when you’re down to the final table. I don’t quite like the notion in financial discussions as I really don’t think the “tournament” ever will be over, but still I find it interesting that many writers now use the term. Somehow it says quite a lot on their view of current events…

10 lessons learned (?)

March 15th, 2010

Not brain surgery, but none the less true. Might be good to print out and post next to your workstation and check now and then. Perhaps it will save some of us the next time it is too-good-to-be-true. I especially like lesson 2, 3 and 4.

http://www.creditwritedowns.com/2010/02/montier-was-it-all-just-a-bad-dream-or-ten-lessons-not-learnt.html

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Shifting more from equities to long term forex

January 26th, 2010

Yeah, I’m selling a lot of my equities right now. The markets was amazing last year, we all know that. I was very skeptical in the beginning months, thinking that it was too early for recovery. But I went along for the ride, and I am glad that I did. Now I’m beginning to worry again, primarily because of the extreme recovery made, is it really sustainable? I’m thinking that it probably isn’t, so I have begun to sell holdings, starting with the ones in emerging markets. Brazil, Russia, India and China was truly amazing last year, but a lot of it (at least in the case of B and R) was fueled by increasing commodity prices, something that China in large part have been the driving force behind by buying and stockpiling a lot of resources. Now there’s rumors that China has enough and will stop buying, immediately leading to lower prices.

In the end my idea is to reduce my equities to about 25% of what I was holding yesterday. I will buy some gold, but I’m not a real gold bug, it’s more of a hedge.

So, what will I do with the money? I will switch it over the long term forex trading. I’ve been running RoboMiner for 6 months now, and made about 80% over that time (really depends how you calculate since I’ve been adding funds now and then, but MyFXBook has gotten it to 80% gain and 50% absolute gain). That is amazing I think. But I think that EA could have done better still with some changes (the Pro version adds a few things like ability to trade all currencies and the shift-function). So I’ve been working on my own grid trader again, that actually is getting quite nice I think. I’m about to start demo trading it seriously at different brokers right now, but in a month I hope I’m confident enough to put it live on a rather big account. I’m really pleased with the backtest performance, which in the case of a long term grid trader is quite precise.

I will start the live test on my existing Alpari UK account and look into opening others. I’m thinking about starting a $10000 account at Forex.com/UK (but perhaps in euros, since I already have a USD account, again to hedge a bit) to get the Pro spreads and five decimal pricing. I’m also looking at FXCM UK.  I really would like at least 1:200 and favorable swaps. Well see. It is fun to code EAs again at least :)

Found collective2.com, interested

August 30th, 2009

Okay, I just wrote the whole deal in the Subject didn’t I? :D

Well, I found www.collective2.com just earlier this week and was intrigued. It’s basically a collection of different trading strategies and also a forum for trading discussions. You can subscribe to different strategies (some are free, but the good ones cost money) and assemble your own portfolio using several of them. One of the great parts is that you can search for strategies with low or no correlation to the ones you already have in your portfolio. This is great from a diversification perspective, which is very important to a multi-asset portfolio of course. There is a huge diversity in the strategies offered, ranging from traditional equity investments to commodities and forex trading systems. You can also setup a strategy of your own and let others use it (and charge for it if you like).

All in all it seems like a great place to find trading systems which invest in diverse assets. Some of the strategies can even be fully automated (like EAs we are all familiar with). I’m going to look into this more when I have some spare time, but that is scarce right now. :)

If anyone have experience of C2 already or starts now, please enlighten us with comments.

End of recession in the US? Hell no.

July 31st, 2009

There’s a excellent article by Tyler Durden at ZeroHedge about the current state of the American economy. It covers basically all the relevant statistics that is used by economists to predict the future. It doesn’t look good, at all.

Read up: http://seekingalpha.com/article/151427-the-end-of-the-end-much-needed-perspective-on-recession-is-over-debate

So what does this mean? Well, I’m suspecting both the American markets and the USD should be hit by this in several stages over the years to come. Sure, last time (this fall) the USD strengthened as the crisis worsened. I’m predicting the opposite now as the majority of investors is starting to doubt the greenbacks long term value. I don’t think USD denominated equities and bonds will be seen as the safe haven it have often been in the past.

Goldman Sachs trading software leaked

July 7th, 2009

Found a very interesting piece by J.S Kim on a leaked trading software developed by Goldman Sachs. It can evidently be used to manipulate markets and make GS millions a year (according to the DA investigating the case). Kim speculates that GS is using it in the crude oil sector. And possibly also in stock markets, remember the low volume bear market rally as of late?

Read up here: http://seekingalpha.com/article/147260-goldman-sachs-thoughts-on-the-developing-stolen-trade-secrets-scandal

So, wouldn’t you like that EA? Unfortunately it probably is useless if you aren’t hooked up to COMEX directly and isn’t in possession of the kind of money GS is. But I bet that there are many financial institutions that are interested in getting the software now…

Update: Tyler Durden also covers the story: http://seekingalpha.com/article/147104-is-a-case-of-quant-trading-sabotage-about-to-destroy-goldman-sachs

Memorial Day, then what?

May 25th, 2009

Since today is Memorial Day I’m laying low, even in the open markets. Last week continued the decline after the move upwards in the beginning of the week (when it hit my stop-loss limits) and I stayed out for most part of the rest of the week after that. The OMX was closed half of Wednesday and whole of Thursday.

The USD weakened against all other currencies last week hitting a low of 7.44 USD/SEK. It will be very interesting to see if this trend continues, since it is remarkable that the both the S&P 500 and the USD declined simultaneously.  Gold is rising at about the same rate as the USD decline.

PA Resources went up again Friday, and really proving to be my #1 moneymaker. I liked the 11% interest in the convertible from start and now, when it’s up 60% since January, I love it. Hopefully it will continue trend upwards with the increasing oil price and then make a jump when the results from GITA is released, sometime this summer/autumn. A rumor going around is that it is a candidate for being bought out by some larger entity in the Oil industry. If this happens we are probably looking at a tremendous payday.

As for my ventures into the FOREX trade it didn’t start great last Thursday with a hit of -6.6%. I think it was a fluke, but I admit that it was really bad timing… But I am still intrigued with the possibilities of automated trading, and I really enjoy tinkering with the robots and their settings.

The only EA I run live is MegaDroid for the moment. I am testing FAP Turbo and Robominer in a demo account also, and considering starting the GridBot in demo also. I probably will start FAP Turbo live tomorrow night (don’t trade FOREX around holidays). You can follow my (or my EAs that is) trades at: http://tylerdurden.mt4stats.com

Bulls on parade

May 19th, 2009

The Market is clearly moving against me. My stop-loss orders have been triggered for SKF, SDS and Xact Bear yesterday or today. I lost some, but not too much. I still think this is a premature rally and that the fundamentals just isn’t there yet, but there’s no arguing with the Market, since only price pays. I’m mostly in cash right now, trying to figure out the direction of the markets for the rest of the week. The OMX Exchange closes midday tomorrow and is closed on Thursday, so I probably will not enter anymore positions at the OMX. The American markets are open as regular and I am tempted to ride this upwards push for the week, perhaps with Direxion Daily Financial Bull 3X (FAS) because of the huge leverage (of course this is risky). But I will for sure get out before the weekend in that case.

On a note of some trades that actually gone my way yesterday and today is PA Resources. I have, for quite some months, had a huge exposure in their convertible KV1 (which I sold of 75% of last week only to buy back at a lower price yesterday). Yesterday the company was mentioned very favorably in the Swedish stock-picking magazine Börsveckan. The stock jumped some 8% yesterday and is up 8% today also. The Convertible is not far behind, but still the favorable lag in its price is a bankable reality. For traders the stock is preferred because of the larger movements in price, but the convertible is far better for long-time investments (the last date to convert is september 2013).

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