Beating Wall Street’s Algorithms Part 2: How To

Beating Wall Street’s Algorithms Part 2: How To

Oct 12, 2005

Is “Reaching Liquidity” causing you to ‘get wet’?
For Institutional Traders and Hedge Funds

Often people get very excited about the “New New” thing. On Wall Street the “New New” thing is Algorithmic trading. This practice allows a trader to let the computer do the leg work in executing orders. The purpose is often to reduce the cost of executing large, involved orders on the exchanges. There are several popular algorithms today provided by big firms like Goldman, Merrill, CSFB, etc.

As brokerages invest large amounts of capital in Algorithms that are harder to detect, we at Trade-Ideas already have a solution to beat the ones currently available OR give brokers the best tool yet to monitor their own algorithms in real-time for undue market impact. [See our previous post, “Best Position: Algorithm ‘Sniffer’” from October 9, 2005 for both sides of this battle.]

Additionally recent press about key trends in algorithmic trading mention Trade-Ideas and its ‘sniffing’ capabilities. Here is just such an article written in the July-September 2005 issue of, The Trade:
“Algorithmic monitoring on tap”

Below is an example of how you can use our analytics to either outperform brokerage algorithms or simply monitor their unintended market impact.

Popular Algorithms and How to Beat Them:

VWAP – You can manually beat the VWAP Algorithm with our Crossed Above or Below VWAP Alert depending on if you have buy or sell orders.

Liquidity – Use our large Bid Size and Large Ask Size Alerts to see exactly when liquidity appears. Remember that people are often hiding size using discretionary and hidden orders, but sometimes that does not make sense so you need to always know when real buyers and sellers are present.

Improvement – Use our special volatility filter to place bids and offers at the best prices for you based on statistical analysis

There are many other ways to get inside the ‘algorithmic pipe’ through which many brokerages send the orders. For more specific information please comment or send an email to