Bad behaviour of HFT

General
1

Nithin

We have huge  volume on futures index i.e. NIFTY daily averaging from 1-3 lakh contracts ...ok

But when i see volume in emini S&P 500 futures index i see daily average of about 1-3 million contracts i.e. 10-30 lakh contracts almost 10 times as compared to Indian markets...ok (no problem here)

 S&P index is currently trading at 2000 level and NIFTY at 8000 level... if i want to compare the two charts then i can multiply the price of SNP by 4 and compare that with NIFTY (hypothetical just to understand price action )

e.g.- a big bar of 5 points in SNP =  20 point in NIFTY 

                              8 point in SNP  =  32 point in NIFTY

(Problem Area)----whenever we see a breakout from a high/low on chart intraday we  see a movement of 30-50 points in 1 min bar (mostly last week this happened) and movement does not stop there it increases to 80-100 points within 5-15 minutes .... this makes us CHASE the NIFTY as the breakout is never clear (it is also not meant to be clear or else everyone will make money LOL)....the kind of BIG BARS that form in 1 minute are HORRENDOUS ....we wait for a pullback and it never comes because of the HFT(High FUCKING Traders)  their algorithms suck ... i don’t understand in what kind of a hurry they are for entering on the breakouts that they drag the market so quickly up or down within seconds that we retail traders (constituting 5% of market ) are forced to chase and end up losing(most of them) .....

Such kind of a move never happens in SNP 500 index ... their HFT (High Frequency Traders) seem to be so well behaved that they do not move the market up/down in a minute ... their sell off or big bulls buying take  atleast 30 minutes to make a move of 20 points (=80 points in NIFTY )BUT here it takes only 3-5 minutes for such a move....what idiotic algorithms do INDIAN INSTITUTIONS (hedge funds,banks,,,etc) are following .....

Is it because NIFTY is trading very less number of contracts than SNP INDEX .....or for what other reason ? why such big bad moves always?(i can attach many charts of nifty showing such bad moves on daily basis)... the market can make a move up/down slowly also(like SNP does) ... is anyone stopping these algos from doing that ....

I am saying these things because when we ask u about  good books ,u name  American authors ...i believe even their analysis would fail by seeing the way our NIFTY is moving ...everytime this happens many experienced traders say its THE  ALGOS who do this so avoid trading.... fine we can avoid but this is happening everytime ....why?

Believe me when i say this – American index looks much safer to trade than NIFTY ...(not to hurt anyone’s  sentiments)

Note – no personal comments please like y don’t u trade snp just forget nifty ...etc  etc  

 (I trade 5-15 min charts not 1 minutes) 

2 Likes
2

Thanks for giving us such useful information.

1 Like
3

Hey Karan,

Firstly, don’t think we can really compare Indian and American markets, the markets in India are quite shallow (less than 0.05% of India participates actively in the markets) whereas the number is almost 100 times in the US markets. More participation and more liquidity usually means that the market better discounts the news/events and hence lesser volatility, what you see in the US markets.

Secondly, HFT’s are usually the scapegoat, but let me tell you that I know a bunch of HFT desks in India and all of them participate in arbitrage strategies, rather than on a directional strategy (things like cash future arb, Put call parity and etc). So most HFT desks are actually helping in providing more liquidity, better price discovery, rather than what you are talking of causing the markets to move away very fast.

The main reason for the volatility in the markets in India is due to the shallowness of participation.

On a side note, isn’t volatility is what traders want from the markets? Imagine if Nifty was in a 20 to 30 point range everyday?

Like they say, grass is greener on the other side. If you ask traders in the US, they would be dying to come trade a market that has volatility, like that in India.

2 Likes
4

now i understand why Zerodha winner Madan Kumar trades breakouts… thanks for bringing this point up :slight_smile:

5

Breakouts fail 90% of the time but in nifty if it is successfull then it goes beyond what u could think with big bars in just seconds but not in snp there breakouts go up slowly giving u a chance to enter and not keep chasing

6

Ekansh, if its a comment that you are adding, you could click the comment link and add yours.
If you feel you are answering, then go ahead and use the answer box.
That’s what it says just below the answer box in bold letters.
Cheers! :slight_smile:

7

THANKS NITHIN…
but even i have had a few words with traders from US and they say that because of the low volume in Indian markets anyone with a decent volume can make our market volatile which is not the case with them … and u have explained nicely why that happens… its true that India needs more participation but i guess even that won’t help much as retail partcipation in any market is very less …its the Institutions only who have a major share of volume … and Indian institutions are not less when compared with others… i believe since our market is different , only we have to adapt accordingly… i guess i have to rework on my plan and thinking …
so when can we expect our new software …anxiously waiting for this new charting software … hope u launch it soon…