Home Trading Strategies How To Compete With High Frequency Traders (It’s Not What You Think)

How To Compete With High Frequency Traders (It’s Not What You Think)

How To Compete With High Frequency Traders (It’s Not What You Think)

hey hey what’s up my friend so in today’s episode right I want to talk about how do you compete with high-frequency traders you know AI is artificial intelligence etc in the future of trade a you know as a retail trader what can you do to compete with this algorithms with this HFD firms these traders who are training you know so many times a day right there definitely more well-funded than you they are faster than you they are probably smarter than you right a lot of PhDs are people working on this algorithm so it’s a retail trader how do you compete and I’m sure that’s pretty much a question right there is on many retail traders might know what advantage do I have I know I’m slower I’m not as smart I’m less funding etc so in today’s episode I want to share with you three things three things that you can do to level the playing field number one you want to trade off the higher time frame right because here’s the thing right HFD traders they are operating on the lower timeframe right yeah roll over here it’s not to capture swings in the market it’s not the right trends they’re just in for the Littlefield’s cover a few fix and gets it right they trade thousands of times a day just to under 1 cent to send here and there you know and suffer a bit of losses here and hopefully after this thousands of traits they do come up profitable so they are trading many times a day right trying to take 1 2 cents out of the different stocks out there then they trade right and hoping to make a profit out of it right they are trading and high frequency they are trading right with very tiny small profit margin right they do stuff like statistical arbitrage index arbitrage volatility arbitrage it and stuff like that ok so if you want to compete with this type of traders this type of HFD traders you want to be moving up in the higher time frame and you might be thinking ok if I move up to the higher time frame why why am I quote unquote safer one day hfts come into my timeframe and and you know take away whatever profits that’s available for me and answer is that unlikely because hey Jeff did they operate in such a low time flip is because there are expenses very hard you have to pay for servers right if the paper location and the the exchange they have you know very high maintenance cost right the developers the programmers the whatsoever so they have to meet right to make money as consistently as possible every day every week or every month and over to financial I think that’s one article that says that out of you know thousand over days thousand plus trading is the only one losing day in the span of time right and that’s why HFD traders they are not interested in trading of the higher time frame because it takes too long to see a profit right if you trade off the daily timeframe you may not make money every day every week or even every month and HTF need traders they don’t want their inconsistency they want something that is consistent that can you know see money every single day and that’s why they operate on such a low timeframe number two to compete with the no hft traders you know a is right you want to be adopting strategy right that has a certain bias in it right then there is sudden phenomenon out there that actually make this strategy that you’re trading works for example right in a stock markets there is a mean reversion bias to it so if you look at the stock market’s right for example the u.

s. stock markets from innocent inception to right now you can see that the stock market is actually in a long-term uptrend and yes we have dips along the way we have recessions along the way we have pull backs along the way but one thing that you have to agree is that you look from the chart from left to right it’s going up higher over time so there’s a bias of the allowance of upward bias in the stock markets and on top of it right for stock markets it is not easy to be a short seller unlike the futures market a Forex you can go long and short pretty much just like that you know but for the stock markets you have difficulty shorting stocks right because of regulations because it’s unethical to do so so that’s why when you treat the stock markets all right with a mean reversion trading strategy right there are certain bias built in for you ready to kind of exploit it right so in the stock markets it makes a pullback there’s a good chance that you know the pullback will end in the up-train will continue and by trading a mean reversion trading strategy you know that is the sound bias behind it there is a concept that actually makes sense right that will give you an edge as a trader to trade and again right HFD traders why would they do this right they probably won’t do this because it’s too slow for them again right so retail traders right or maybe larger hedge funds they might adopt such trading systems but you the retail trader you can also take part in it right so there’s one example of you know trading strategy right that actually has a a sound logic to it and the last thing that I want to share with you is number tree right always test as a retail trader you have to be willing to do research to find out new trading strategy to find out we know what works and what don’t you can’t just leave it up to you know foreign blog posts or trading with Rainer to to tell you know what works and what doing right because you can’t take anything that I say at all at face value what I’m sure is just based on my own experience by on my research I could be wrong and I’ve been wrong many times so whatever that you’ve learned on the internet books blog forums whatsoever you have to do the testing let me give you a couple of examples number one Renaissance Technologies right is a firm right hey it’s fun right run by gene Simmons I think possibly one of the richest traders out there and when I read the book write is that the way they developed trading systems is that they exploit right certain patterns in the market they have no idea why that pattern works but they realize that that pattern is very consistent it just works over a window whatever data set Native time they’re testing on and they trade that pattern they’re always testing on new patterns and you just trade it even though there’s no logic to it and that kind of contradict what I said earlier because again you’re not HFD you’re a trader a retail trader who are who is trading off the higher time frame so when you are trading such a low time frame right high-frequency trading they might just identify patterns that has been no recurring repetitively right he might just trade a pattern without any rhyme or reason without any logic to it but as long as the pattern works they will trade it then they’re always testing right finding out new patterns then they can identify to trade off so that’s one example of you know a firm right possibly one of the best hft trading firms in the world doing that always testing and then there’s another trader I wanna share with you Andreea Unger he’s a world cup trading champion right again possibly one of the best independent retail traders out there and if you studies well he’s also always testing he’s testing individual markets is the market and having a trending behavior is it a mean reverting behavior if I have a hundred people stop-loss for this market with a 300 people tell your profit how would the results change how would the back test results differ it’s always testing finding out new ideas testing and becoming a better trader and these are people that are pretty much at the top of their game now what about you the retail trader watching a video from me you had better be willing to do the work to do the testing to research and find and validate new trading ideas or concepts if you’re not willing to write then really you’re pretty much you know out of luck out of business and it’s gonna be difficult for you to you know win in this business alright so with that said right hopefully that gives you a glimmer of hope to what you can do to compete with hft is a is whatsoever with that said I wish you good luck and good trading and if you enjoy this video this episode give me a thumbs up subscribe to the YouTube channel and I will talk to you soon you


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