XTO (ASX) Systems

Originally posted by journeyman ↑

Thanks Zesty, really appreciate that as well. I've had a super busy week with end of financial year (one of my occupations is accountant) and no time to properly digest people's replies and respond, but one thing that you make me think of again which has been on my mind...

All of you seem to move towards FX and futures markets for liquidity reasons predominantly and I fully understand that concept (a basic level), but aren't you also just choosing to go up against a substantially greater number of professionals?? From everything I've read, anyone that gets serious about trading (algos or not) tends to start focusing on the FX/futures markets very quickly. I am sceptical that there many minnows in that market at all and vast majority of players in those markets are either big time professionals or at least probably very well educated like you guys are now. If you looked at the demograph of equities though, there is a substantial percentage of "un/under-educated" market participants that are easy to pit yourself against. Even amongst the top 200 stocks, most of the big fish are probably doing buy and hold strategies rather than just purely actively trading the sp, but of course there's many traders that would be doing that as well. Just seems like there might be a great 'edge' to be realised in the equity markets (the "inefficiencies" that you talk of)?

So I guess i'm thinking with respect to this concept that only 5% ever get consistently profitable... in the equity markets, it feels like it would be much easier to get into that 5%. However, in the futures/fx markets, I feel like you need to basically be at a 'professional' level with trading just to still realise that same 5% probability?

All of this probably just reflects the stage of learning I'm at with it all, but it's something that's been in the back of my mind, so very interested to hear your opinions on it all.

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The liquidity is good but it's not why I trade Fx, I trade it because it is more technically driven. However yes I also believe you need to swim harder to keep up, this is why I think there is less efficiency in the ASX (which is a good thing for making money). Basically, easier to learn in Forex, but easier to earn in equities? I am basing this on a hunch, noting I have never actually attempted to trade equity markets systematically (I was always a discretionary trader).

I agree it is probably harder to be profitable in the Fx market and that you are up against much more serious players. Having said that, it is still more technically driven IMO, and that is a good thing when it comes to building algos?

I'm not advocating Fx markets either, it simply made more sense for me to go down that path, and there is a LOT more resources out there for algo trading Fx than there is other markets from my experience, so perhaps that is why people gravitate to Fx, path of least resistance?

Other thing I would say is that Fx markets are better for building big portfolios compared to ASX, for more than just liquidity. Once you have a portfolio focus and start to look at the overall correlation of your portfolio, you start to spread yourself over more markets which have different drivers, meaning you can expect more consistent/robust performance through various market conditions and market cycles. Whereas if you commit to ASX equities only, for starters it is harder to short instruments than it is to go long which means you have a prone to directional bias, and what happens in GFC, most/all of your strategies go out the window? Whereas in Fx market you can make just as much (if not more due to extreme trend and volatility) during a GFC style event. Just one example of another difference between the markets from my perspective, and also perhaps why the 'bigger players/experts' all compete harder with one another on the Fx stage?