HFT Alert Software and Website

[Billy]

My God! This is revolutionary. I am sure it will become a hot topic in the E-Mini forum!
A one-month trial of the "Lite" version is only $ 25

http://www.hftalert.com/index.html

[lulzasaur]

wow...this is amazing. is there any way to save the data generated during the day and store it in some sort of database?

[nickola.pazderic]

Thanks for the link. Your expressed enthusiasm certainly recommends the service, and I looked at the introductory videos.

And while I know the following reveal an embarrassing ignorance, I'd like to ask nonetheless:

1. How would you or someone else employ the information to improve discretionary trading? Can illustrative examples be provided?

I am concerned there would be information overload and that the information may not prove any more valuable to my slow biological response mechanisms than a simple price and volume chart.

2. Can the information from this service be integrated with EV tools to improve the effectiveness of, for example, the robots?

As a robotic trader, I am concerned that I'll subject myself only to more noise insofar as I'm incapable of making use of it. In particular, I can imagine the necessity of setting another screen to this service, which I must monitor as I monitor other screens that show, for example, tick readings, volume profiles, pivots, and all the tools of detection, which traders in this group employ regularly.

I certaily don't expect any answers but would enjoy greatly any thoughts that people might have.

Many thanks,

[Billy]

lulzasaur, these kind of questions should be asked directly to them. I just discovered the website.

nickola, I haven't had time to dig much yet. I found the site from Dave's Daily at ETFDigest.com.
They announced 2 videos for next week on how they use the software.
They (etfdigest) are also offering a Tom DeMark indicators service for ETFs.

HFTalert seems to recommend fading the moves when HFT programs are detected. There's nothing much I can add without trying the service first.

Billy

[nickola.pazderic]

Billy,

Very glad you're back from your day of leisure. And thanks for your replies. I look forward to more videos, opinions from other trading wizards, and any opions you may form in the future.

I wish I could be more helpful myself. It does appears promising.

Best

[Ellis Wyatt]

1. How would you or someone else employ the information to improve discretionary trading? Can illustrative examples be provided?

I am concerned there would be information overload and that the information may not prove any more valuable to my slow biological response mechanisms than a simple price and volume chart.

In particular, I can imagine the necessity of setting another screen to this service, which I must monitor as I monitor other screens that show, for example, tick readings, volume profiles, pivots, and all the tools of detection, which traders in this group employ regularly.

Nikola,

I also look forward to hearing especially Bob on this development. Having some interest in this topic myself, I can offer the observation that the screens shown in the HFTalert samples bear an identical resemblance to the screens regularly captured and displayed by Nanex, a real-time market data service provider whose reputation was made on their detailed analysis of the May 6th, 2010 Flash Crash. It would be reasonable to posit based on the resemblance, the theme, and the location of HFTalert in southern California, that Nanex is somehow involved in HFTalert, which in my mind would be a solid endorsement of the HFTalert tool.

For a good primer on the effects of high frequency trading algorithms, the effects on US equity and commodity markets of quote stuffing and the phenomenon of that practice overwhelming the National Best Bid/Offer (http://www.investopedia.com/terms/n/nbbo.asp)(NBBO) system which is unique to the US, and is related to the technology capabilities of the Consolidated Quote System (http://en.wikipedia.org/wiki/Consolidated_Quotation_System) and Consolidated Tape System (http://en.wikipedia.org/wiki/Consolidated_Tape_System), see the below, and other, research pieces from Nanex.

As far as immediate practical intra-day trading benefits, my first reaction was similar to yours, quoted above. The apparent goal of hft quote stuffing has been to overload the CQS ad NBBO relays (http://www.zerohedge.com/article/visualizing-market-topology-video-real-time-exchange-routing) sufficiently to create a signal delay of enough micro-seconds that intra-exchange arbitrage opportunities can be exploited at the levels of fractional pennies per trade. Most documented instances of the phenomenon show effects lasting less than one minute, and many rogue instances result in busted trades (http://www.nanex.net/StrangeDays/10192011.HTML), usually in single equity issues.

There have been rare instances in which the entire US equity complex has been affected for more than a day; the Flash Crash was one, and there may have been another related to the US equity ramp on Tuesday. (http://www.zerohedge.com/news/hft-quote-churn-surge-mirrors-stock-spike)

Nanex' original breakthrough research on quote-stuffing and the Flash Crash:
http://www.nanex.net/20100506/FlashCrashAnalysis_Intro.html

The dangers to short-term traders involved in the NBBO vulnerability:
http://www.nanex.net/FlashCrash/FlashCrashAnalysis_NBBO.html

A single stock case study of CQS quote stuffing creating exchange delay arbitrage:
http://www.nanex.net/FlashCrash/FlashCrashAnalysis_LOD.html

The master link to all Nanex research:
http://www.nanex.net/FlashCrash/OngoingResearch.html

I should hasten to add that the ES, the mini S&P 500 index future contract, is traded in Chicago and not New York, is not itself subject to the NBBO or CQS, and is alleged to report as close to pure volume data as is possible. Though the ES is not immune to algo interference, and its price level within the SPX complex is certainly affected by violent movements in highly correlated equity prices, it remains the safest and most liquid of intra-day instruments. Traders devoted to the ES should certainly be aware of these phenomena, but the risks of HFTs directly flash-crashing the ES should be placed in a reasonable context. In my limited experience, the CME Group has a much tighter leash on its operations than the gang in New York.

[Andrei]

Having some interest in this topic myself, I can offer the observation that the screens shown in the HFTalert samples bear an identical resemblance to the screens regularly captured and displayed by Nanex, a real-time market data service provider whose reputation was made on their detailed analysis of the May 6th, 2010 Flash Crash. It would be reasonable to posit based on the resemblance, the theme, and the location of HFTalert in southern California, that Nanex is somehow involved in HFTalert, which in my mind would be a solid endorsement of the HFTalert tool.


Ellis, you are right, Nanex is involved in HFT Alert.

<<The underlying technology behind HFT Alert was developed by Nanex to analyze the Flash Crash and HFT activity. HFT Alert packages 6 useful utilities rolled into an easy to use application to help you identify when HFT's are running and affecting stock prices.>>
http://www.hftalert.com/hft-alert.html

[nickola.pazderic]

Ellis and Andrei,

Thanks for adding to my reading list! I should note that I conduct as much difficult research in this business as I did as a professional researcher/teacher. The flash crash remains one topic (of many) that I haven't pursued to satisfaction. The constant "who done it?" character of the flash crash in particular and the failed knot of social relations which threatens to pull global banking into a "black hole" gives the work the thrill of mystery. To return to the thoughts of Dr. K (yet again), I follow my bliss in this. Although the burden of the (re)search is huge, my thanks are most genuine.

[EB]

Here's a free service that updates each minute and shows quote frequency across all the US equities and options feeds.

http://marketdatapeaks.com/

I have not figured out a way to make it useful, though I have noticed that sometimes quote bursts occur very near the same time that liquidity is pulled in the ES though the proprietary method I've document here prior.

Ellis and I did substantial research on the history of the NYSE post-IPO, including the flash crash, and found some interesting things that I will put together and write about in the coming months. For now, what he posted is good background. And, indeed, high liquidity and decent operational control by the CME of its exchange is why I prefer to trade the ES.

[Andrei]

Here is the question and answer I received form Steve Hammer of HFT Alert regarding his software.


Steve, it's extremely innovative software and possibility. But the main question is this - have you been able to found high-probability setups or quote-churn activity with certain characteristics that lead to profitable trades?
You say that some algos can move price by 1/2 percent in a second, but if we react after that second, the move is missed. Also algos come and go, but does price tend to do something predictable after algos finished their job, given that we can't react in a millisecond?

So actually seeing algos in process in very good, but can we partake in action with them with good results?

Thank you.


Steve Hammer

The short answer to your question is yes. The longer answer is it also depends on your trading skills and how you trade. I wrote a piece that's on my site about using HFT Alert while trading 1 minute SPY bars: http://bit.ly/nfytsn

There are basically several ways to interpret spike activity which I can't go into too much detail here (read the piece and others on the site that go into this). When the market is trading a range during the day, watching where the spikes come in and how many stocks they involve will tell you whether the range will hold or break. When news comes out, this typically results in reversals. The algos run price up faster than we can react as individuals. But knowing they are doing this and seeing how large the spikes are, we can trade against their activity. In this case, it's not so much being in on the initial move as knowing when to reverse it. And we often see huge spikes that 'cap' a move, again, sets up a reversal.

Watching quote rates that show up on the raw quote burst monitor also can identify individual stocks that are attracting a lot of interest. Quote rates often precede trade rates.

http://seekingalpha.com/article/299807-monitoring-for-algorithms-a-new-capability-in-a-computerized-market