For Renowned Speed Trader, Humans Not Allowed Anywhere Near High-Frequency Execution System

June 29, 2012 - PRLog -- It took a while for Adam Afshar, one of the leading high-frequency traders featured in Edgar Perez's The Speed Traders: An Insider's Look at the New High-Frequency Trading Phenomenon That is Transforming the Investing World (http://www.thespeedtraders.com), to believe that the markets were more orless efficient under normal circumstances and to realize that theanalysts at most firms provided no value and sometimes a negativevalue. He says, “My first attempt at using the computer was to builda system to help traders have better information faster to enablethem or their portfolio managers to make better decisions, a sortof hybrid system where the computers are helping the humans.But, in less than a year, I realized that discretionary human participationin selection, portfolio management, or trading was sodeleterious that no amount of computer power or intellectual algorithms could mitigate it.”

He adds: “It’s very important to stress this point because if the systemallows human discretion at any level (idea generation, portfolio management, or trading) and your machine does not have the human discretionary elements modeled correctly in its learningalgorithm (which we claim is not possible at this time), what youare left with is simply a quantitative trader that uses certain calculationsto assist his or her trading. It becomes difficult or even impossible to assess whether the success or failure was due to thecalculations, formula, or algorithms. Although we can argue on the pros and cons of humans as traders, we have to agree that thismethod is not and cannot be scientific. It is not scientific because it is not possible to backtest a model that allows any discretionaryhuman intervention. For example, if you have computers that aregenerating trades, but the execution is done by humans, then wewould argue that you cannot determine whether the success orfailure of the system was due to its robust artificial intelligence orto a very good trader, and there is no way of testing and duplicatingthe results. Therefore, we would argue that any back-testing becomes essentially void.”

Hyde Park Global Investments, Afshar’s firm, is an investmentand trading firm that has developed an artificial intelligence systembuilt primarily on genetic algorithms and other evolutionary models to identify mispricings, arbitrage, and patterns for manyelectronic financial markets and the robotic platform to monetize the opportunities. The firm, which trades its own capital so far,potentially will accept investments from outside sources.
The Speed Traders,http://www.TheSpeedTraders.com, published by McGraw-Hill Inc., is the most comprehensive, revealing work available on the most important development in trading in generations. High-frequency trading will no doubt play an ever larger role as computer technology advances and the global exchanges embrace fast electronic access. The Speed Traders explains everything there is to know about how today's high-frequency traders make millions—one cent at a time.”

Mr. Perez is widely regarded as the pre-eminent networker in the specialized area of high-frequency trading. He is the founder of Golden Networking and host of High-Frequency Trading Happy Hour business receptions (http://www.hfthappyhour.com) in New York City, which have drawn the world's top industry practitioners. He has been interviewed by CNBC, TheStreet.com, Bloomberg and Channel NewsAsia, and engaged as speaker at Harvard Business School's 17th Annual Venture Capital & Private Equity Conference, Columbia Business School's Career Management Center and Alumni Club of New York, High-Frequency Trading Leaders Forum 2011 (New York, Hong Kong, Chicago, Sao Paulo, Singapore), CFA Singapore, and Hong Kong Securities Institute, among others prestigious forums.Mr. Perez is one of the great business networkers and motivators on the lecture circuit; he is available worldwide for the following speaking engagements: Present and Future of High-Frequency Trading, The Real Story behind the "Flash Crash", Networking for Financial Executives, and Business Networking for Success.