Address

Author Topic: $500k from High Frequency Trading and Machine Learning, a tutorial  (Read 4248 times)

tetsuharu

  • FamiLAB Member
  • Sr. Member
  • *
  • Posts: 487
  • My sincerest contrafibularities.
    • View Profile

This story showed up on Hacker News last night:

http://jspauld.com/post/35126549635/how-i-made-500k-with-machine-learning-and-hft


I have no doubt that HFT can yield results, and that there is a lot of untapped stochastic analysis left with using ML to predict those changes. That I will never question, but that seems to be what these 'Big Data' guys always want to talk about: "omg isnt it so amazing we can predict the future now (just without physics and chaos-theory level)"


In my opinion, if someone manages to rip $500k out of the stock market, and they decide to use it to retire, I am disappointed. That's spreading a message that is very non-egalitarian, and I appreciate egalitarianism.


I would be okay if someone decided to rip out $500k from the stock market to put into some kind of business venture to undermine the power of current financial elites. If we manage to yank out a lot of money from the stock market, we either destroy the life-savings of regular people's IRA's or we put the financial elites in defense mode. Isn't that when they start spreading propaganda about the economy going to shit, raise the prime interest rate, buy out smaller banks, companies, homes, and justify freezing salaries?


The success of HFT and, more important, ML to the distribution of wealth is a powerful tool. I don't want to see it wasted on just a few retirement funds.

tomlong74

  • FamiLAB Member
  • Full Member
  • *
  • Posts: 127
    • View Profile
Re: $500k from High Frequency Trading and Machine Learning, a tutorial
« Reply #1 on: November 29, 2012, 10:43:18 PM »
I actually gamed the forex market. I was able to figure out the algorithm that brokerage house used. I could have walked away with 500k in one night but I didn't have the balance to leverage it. By the next morning they were on to me an change the algorithm.

tetsuharu

  • FamiLAB Member
  • Sr. Member
  • *
  • Posts: 487
  • My sincerest contrafibularities.
    • View Profile
Re: $500k from High Frequency Trading and Machine Learning, a tutorial
« Reply #2 on: December 01, 2012, 10:46:36 PM »
What did you think about the morality of the act?

I presume the large firms are interested in protecting themselves, and have probably gotten very good at it. If you managed to extract a large amount of money from the stock market, are you taking money from the stock market, from the big heartless investment firms, or from people putting money away for retirement?

tomlong74

  • FamiLAB Member
  • Full Member
  • *
  • Posts: 127
    • View Profile
Re: $500k from High Frequency Trading and Machine Learning, a tutorial
« Reply #3 on: December 04, 2012, 01:02:57 AM »
1) morality... it was a rush solving a problem that is supposed to be unsolvable by design.

2) taken money from.... Yes. To all of those. It's a shared pot. And oh ... all those evil corporation that only care about fiduciary responsibility to the stockholders... those shareholders are retirement funds  for all the same people that complain about evil companies. But mostly your pwning noobs in the market.

Ben2

  • FamiLAB Member
  • Jr. Member
  • *
  • Posts: 95
    • View Profile
Re: $500k from High Frequency Trading and Machine Learning, a tutorial
« Reply #4 on: November 22, 2013, 04:23:40 PM »
My Macroeconomics professor told us a story about trying to "predict" the markets...
 
There was an economist who claimed he could "predict" whether the stock market was going to go up or down in a given year... He analyzed  tens of thousands of prices and markets in our environment (for which data was available), then he discovered what was his holy grail... the one variable in the world that is 100% accurate in "predicting" whether the stock market will go up or down in the next year.  It was peanut butter... if the price of peanut butter went up, the market went down, and vise-versa.  This mathematical relationship was accurate 100% of the time for the prior 50 years in a row... so how could it be wrong???  He was heralded as a genius for discovering the magical variable that is a direct one-to-one correlation to the stock market.  He named it "the peanut butter predictor"  and got quite a bit of attention in economic circles for his brilliant discovery.
 
Over the next 10 years that went by, the "peanut butter predictor" had about a 50% accuracy rate in predicting the stock market, same as flipping a coin.  So what went wrong?  The fact is if you analyze tens of thousands of variables you'll find SOMETHING in history that corresponds to something else in history.
 
As far as high-frequency-trading in the stock market with a computer, machine learning is indeed powerfull, but it has limits.  Mathematical realtionships observed in history may or may not hold in the future.  Just like the peanut butter predictor...
-Ben2

johnbentcope

  • FamiLAB Member
  • Hero Member
  • *
  • Posts: 584
  • I make technology into art and art into porridge.
    • View Profile
    • JohnBentCope
Re: $500k from High Frequency Trading and Machine Learning, a tutorial
« Reply #5 on: November 22, 2013, 09:23:50 PM »
Let's all start trading stocks! It's Peanut Butter Jelly Time!!!
I like colors.

Ben2

  • FamiLAB Member
  • Jr. Member
  • *
  • Posts: 95
    • View Profile
Re: $500k from High Frequency Trading and Machine Learning, a tutorial
« Reply #6 on: November 23, 2013, 10:19:07 AM »
Or start a blackjack team, like Massachusetts Institute of Technology did, and hit Vegas with a trained card-counting team, like in the movie "Bringing down the house" (Or some title like that).  Lol
-Ben2