Algorithmic Trading

For Ray Dalio, a Year of Losses, Withdrawals and Uneasy Staff

When algorithms fail.


Ray Dalio hedge fund is an investment firm, not a trading firm. They may use software, but the failure to grow is their own failure.

See another case, Pension fund scrapped the hedge, luckily escaped the crash.

Hedge for billion fund is a kind of insurance. Big billion funds are forced to follow investment (by virtue of big money), but not trading.

All available/claimed working or publicly available are not so great. See here the scam kind of claim.

Almost all successfully working algorithms are kept secret, no one really know. Only few funds like Medallion uses algorithm for trading, which is highly secret. There is no incentive for them to share.

Most sophisticated options players/traders in the world – the Susquehannas and Citadel Securities – are extremely focused on this flow and predicting it in real-time. These are HFTs. There are 10 Top HFTs and they are mostly dealers (they buy stocks from broker’s feed and sell it to third party).

Most HFT “algorithms” are just trying to front-run other trades. Total intellectual waste.

HFTs are dealers, just buy/sell from us, mainly used for liquidity market. They just function like auction houses, make money on spreads.

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Jim Cramer said your algorithm trading is causing today’s ATH in indices.

He said that many index funds still didn’t own enough TSLA and are forced to keep buying when TSLA rises (because of RHers) - positive feedback.

All HFTs are using lot of algorithms, very complex, high power computations, this has been going on many years, more than a decade. Rhers are part of the game, but big banks/funds (wallstreet) is still holding the centers.

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There are 2 separate things that happen:

  1. HFT firms pay for the order flow and front run orders. It’s bad to not use limit orders, because they’ll front run your order and make you pay more.

  2. There are actual algo’s that trade based on inputs. They’re doing stuff like measuring company mentions on Twitter and assigning sentiment. That stuff is using sophisticated ML.