Monday, 20 September 2010

Man versus Machine - survival of the fittest

Since the so called Flash Crash, I have seen lots of articles and comments about the wickedness of high frequency trading.  The wickedness of the masters of those bots and how people can never make money again. These types of comments are still appearing with many people showing a lot of anger.

I'm sad to say that most of these detractors of computerised trading are just plain wrong.

Now, I'm not referring to a situation where someone has insider knowledge and can front run using that knowledge. That's plain dishonest.

What I am talking about is using computers to trade and co-locating those computers at exchanges.That's smart.

Order stuffing is a real pain, but it's using the technology and presently within the rules. An electronic exchange that wants to stop it can stop it easily with rules and with technology.

While true HFT may be only available to entities with enough money, that's fine with me. So is investing money in finding cancer cures and then selling the cure. That's business and some businesses require more capital than others.

As far as competing in the markets with the bots, I've been competing in the markets in one form or another for more than 45 years, sometimes successfully and sometimes not. Just because I may not be good enough to win does not mean the fittest should be handicapped. We all need to find our place in the market to compete successfully (read profitably). While the markets' volumes and volatility and rhythm change, markets still feed on order flow. It's my job to read the flow and ride my surf board with those waves. If I can't do that then I have to learn the flow or not surf. Trading requires me to observe and pay attention to what "they" are doing if I want to trade profitably. If I couldn't trade profitably then I can't blame the bots.

Darwin determined a long time ago that it's the survival of the fittest.

BTW, this is one of my best years yet for trading.

REMINDER: Free 1 Hour Webinar on Thursday Sep 23 - A taste of EL
where I'll show you how I trade and more importantly, how to learn to trade. It's not just setups but the method in the madness. 


  1. can't follow the webinar live - will it be available for download?

  2. Pending and technical meltdowns, it will be posted the next day

  3. Hi EL,

    I am noticing that you are trading the Euro FX futures very often... Do you believe that there is more action that in the European stock index futures during the London morning session (9:00-12:00AM, GT)? I mean the S&P is not moving that much during this time... The same applies to European index futures... Is the Euro FX future one of the better instruments for the European morning session?

    Thanks a lot!

    Best regards,

  4. Hi Samer, yes, the Euro has the most opportunities for me at the moment. I start looking at 6am (London) although the Asian time zone also has opportunities.