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Why popular methods of technical analysis fail to work?

Started by JohnLast 2523 days ago

Recently I took occasionaly part in a discussion in linkedin in the closed group Authomated Trading Strategies.

The group is closed and it takes time to get approval in order to have access however it is worth especially if you can read between the lines. You know some people just can't tell you even if they want because it is working know how. So they just give you some hints and if you are up to the level you can understand what it is about.

So the market today has become more and more complicated even for the very experienced. I would like to share some comments and ideas that are coming from there, as the thread grew up.

I have written before in another forum, that the HFT are inducing a risk that did not exist before. The risk to loose everything in a split of a second, because as HFT is designed to trade in milliseconds and make thousand of trades if something gets wrong maybe you are going to be late to notice that. So here is the quote

"I once saw something that was inches away from a loss that literally would have wiped out the firm I was with.

They had a strategy with no stop loss (it was not my algo by the way) because they were always on both sides of the market. Unfortunately one side of the market lost track that the other side was the same algo at the same firm.

The two sides of the same algo started trading with each other and because they had naked access so all the risk checks were post trade. It traded hundreds of thousands of times with itself before someone saw what was happening. They lost their prime broker over it and had it gone on for a few more seconds the firm would have been wiped out" by Boulette

 

There a lot of comments about the dark pools volume and that it is maybe the real volune and that on the stock market is manipulated by the HFT rebate traders.

"I know of a trade where someone sweeps the book with a single marketable limit order. They also have an order to exit just beyond where the limit order stops.

For example if the 6E (Euro futures) is trading at 1.3010 some sweeps the book to 1.3015 with a sell order at 1.3016-1.3018. They cover what they bought and make money off the lower prices they got as well as any stops that are run or momentum algos that joined in. In the end, worst case they effectively trade part of their order with themselves if no else joins the move. This is frowned on by the CME but to the best of my knowledge is not illegal.

There are variations on this theme but to what you are saying, this makes a lot of technical analysis difficult if not impossible in the shorter time frames. On a 30 minute chart you wouldn't even see it but in the HFT world if you cannot detect this type of game, you will soon be out of the game yourself.

 

And a question may be asked  

As dark pool volume swells to what I believe is as much if not more than actual volume that flows to the market how does it not effect analysis?