Man vs Machine

[Iron]

In the financial markets, something like 80% of trades are between bots. Arguably the human traders who compete against those bots fund the bots, ie people gambling that their fundamental and technical analysis can beat the market long-term. Good luck to them...

Jeff

Why do we need traders on the markets when we could have bots with proven record

[LeTiss]

I agree with that, but sports trading is very different from financials. If I was competing against a bot for financial trading, I'd always be playing catch up, but with sport trading, I'd fancy my chances to make better decisions than him 75% of the time

[pdupre1961]

A quick question Le Tiss, you said a while back you had a problem with Guardian skipping some football matches.

Does that still happen?

[LeTiss]

A quick question Le Tiss, you said a while back you had a problem with Guardian skipping some football matches.

Does that still happen?

I used to get a problem with Excel not working properly when I had a number of active sheets.

Is that what you're referring to?

To be honest, I'm trying to use BA automation now rather than Excel, as automation through Guardian is far more reliable for refreshing. Excel is better and has far more capabilities, but was terribly unreliable once I had 5 pages or more, so I rarely use it now

[pdupre1961]

A quick question Le Tiss, you said a while back you had a problem with Guardian skipping some football matches.

Does that still happen?

I used to get a problem with Excel not working properly when I had a number of active sheets.

Is that what you're referring to?

To be honest, I'm trying to use BA automation now rather than Excel, as automation through Guardian is far more reliable for refreshing. Excel is better and has far more capabilities, but was terribly unreliable once I had 5 pages or more, so I rarely use it now

Good, I'm glad you managed to find away around the problem.

[Steve Works]

I'm reluctant to accept the hypothesis. The amount of variables are too great to program a reliable bot. I'd rather stick to my tote machine "addiction".

[JayBee]

...I can't remember the figure, but a huge percentage of transactions in the stock exchange are between high frequency trading computers, not humans. That would suggest that those bots are making their owners money and taking money from human traders.

In the financial markets HFT bots are doing nothing that requires intelligence. HFT bots monitor the exchanges, looking at order flow. If the bots see a move on a particular stock then they will buy it up and act as the intermediary between the buyer and seller.

Many electronic stock exchanges have a system (that I would like on Betfair) called Maker/Taker, whereby if you offer a price as a market Maker then you will be offered a share of the exchange commission payed by the Taker who crosses the spread to take a price.

This means that HFT firms largely make profits from commission rebates and not from any knowledge of where the markets are heading.

You are probably mistaking HFT with other forms of automated trading. Don't confuse it either with Algorithmic Trading, which is the splitting up of an order into smaller orders either to avoid detection by HFT (whose job it is to discover this) or to not spook the market and cause a run on a stock.

...Computer programs have beaten Gary Kasparov at chess (arguably the greatest player in history), so I think it quite possible that they could beat a human at Betfair trading who was just 'playing the numbers', without looking at live news or studying form.

Jeff

Chess is a deterministic problem. For any board position there is an optimal move. Financial time series analysis is distinctly non-deterministic and highly non-linear. In chaos theory we call this sensitive dependence on initial conditions. This means that a set of figures maybe almost the same as another but the market can head off in completely different directions for both.

As you know, my research is along the lines of automated trading. I have settled upon a hybrid approach with bots that present data to me quickly and efficiently for myself to be the final arbiter of to trade or not to trade.

I think that is the best that can be done as far as Betfair is concerned. If they move to a Maker/Taker model for commissions then I may move into HFT.

JayBee.

[marksmeets302]

In my previous life I made software for an HFT. Still shareholder of that company so I can't say a lot about we did, but I can tell you a lot of our money came from things that require even less intelligence than what jaybee says. Think arbitrage. It requires tremendous investments in infrastructure and people that know exactly how products are structured, but other than that...

The HFT you refer to is a game that is mainly played in the US were rebates are common. Acting on moves is difficult, because you have to predict what happens next. Acting on a situation where there is free money is infinitely easier.

On the question if machines are better at predicting the market, I would say they both suck at it. On who is the better trader I think computers are far better at exploiting everyday situations (ie, make a small bit of money, but hundreds of thousands times a day). But humans can still outdo them by using intelligence and make a shitload of money once every blue moon.