Make up a movie review while there are few people.
After reading the "Hummingbird Project" yesterday, I wrote about the crazy story of two stock market high-frequency traders who wanted to shorten the transaction speed by 1 microsecond and did not hesitate to obstruct the repair of an optical fiber cable from the West Coast of the United States to New York.
This film gave me a rare movie-watching experience, that is, it began to expose the in-depth logic of the so-called capital and the inevitable collapse of the so-called capitalism. This is the depth that the previous feature films about the financial crisis and documentaries like "Big Short" and "Wall Street" have not reached.
About 8 years ago, I was exposed to high-frequency trading and foreign exchange leveraged trading for a period of time. High-frequency trading is the use of programming to allow the system to automatically and quickly trade. The key to high-frequency trading is to find a stable trading logic and find a suitable time node and conditions for placing an order and closing a position.
High-frequency trading can avoid the fragility of human nature, without greed or fear. No matter how large the amount is, it is just a piece of code in the system. Therefore, the use of high-frequency trading can make profits stably, rationally and quickly. Compared with manual trading, high-frequency trading can be at least tens to hundreds of times faster.
During that time I wrote a very simple trading system. In one year of actual operation, the profit rate of the system can be stabilized at more than 60%, and the profit multiple is about 3 times, that is, the average expectation of loss for each order is 5 dollars, and the average expectation of profit is 15 dollars. The program runs transactions automatically, the frequency is not high, 3 to 8 times a week, without leverage, earn an average of 30-50 US dollars a week.
This looks pretty unremarkable, right? What about adding leverage? What about adding a leverage of 1:500?
I dare not let the system run automatically in a 500 times leverage environment, because of the fragility of human nature, it is difficult to withstand tens of thousands of dollars in fluctuations within a second.
I am Leek, and of course I cannot afford large transactions. Can a professional trader do it?
The only theorem: everything will change from moment to moment until it finally dies.
For high-frequency traders, the biggest nightmare is that the system will collapse. As time goes by, the profit rate of 90% or more will slowly drop to 40%, and the profit multiple will drop from 10 times to less than 1. As long as the trading cycle is lengthened, instead of hundreds of years, up to 20 years, the final result of any trading system will be exhausted.
What can a trader do? You can only continue to debug and improve, optimize the trading logic, and screen the trading conditions more carefully. But at this time, we are about to face the second problem.
The more sophisticated the system, the shorter the effective time. The simpler the system operating conditions, the longer the survival time, such as the turtle trading system.
Why does the finer the better, the shorter the life? The logic behind it is simple. If System A is used in the market, everyone makes the same money. When the more refined system B appears, B will make more money than A in a short period of time. Then more and more people began to use system B to make money. As the number of users increased, B's profit gradually declined, and eventually became the same as A or even worse than A. At this time, B died.
The finer the thing, the faster it will die.
When the fine B is gone, traders will make a finer C; when the finer C is gone, there will be a finer D, and there will be EFGHI... But the existence of each system will only get shorter and shorter , And finally reached the critical ceiling.
Someone asked again, why must it become more refined and efficient? Can't I get rougher and simpler?
No, because capital or capital society does not allow this logic to exist.
The core of capital lies in the fact that the capital itself must be sustained and stable, and it is best to increase it acceleratingly. If you don’t have enough deposits of 3%, you need treasury bonds; if you don’t have enough treasury bonds, you get 8% of corporate bonds; if you don’t see enough bonds, you get 15% of the fund; if you don’t have enough funds, you get 30% of the stocks. If you don’t have enough stocks, you get 100% wind Invest in listed profits.
What to do if you can't achieve higher and stable returns? Use leverage. 1:5 is not enough, up to 1:10, 1:100, 1:1000... However, the greater the leverage, the higher the risk. Once you reach tens of thousands of leverage, let alone the storm, the wind blown by a butterfly can blow down the entire trading market.
So far, do you understand the logic behind why capital must die?
The only essence of capital is to achieve continuous acceleration of self-proliferation. However, everything will change at any time until it dies.
Capital believes that it is constantly upgrading, from the steam age to the electrical age, to the information age, and the quantum age and the virtual age may follow. Capitalism has been upgraded from one-dimensional to two-dimensional and three-dimensional, and it is getting farther and farther from the floor. You can turn the world upside down, the ceiling becomes the floor. With each upgrade, it gets closer and closer to the ceiling, faster and faster. Upgrading is actually downgrading the internal volume, and upgrading becomes dimensionality reduction.
The optical cable plan in the "Hummingbird Project" that was shortened from 17 microseconds to 16 microseconds can make the company earn 500 million US dollars a year, but in less than two decades, the entire trading market will inevitably collapse. It is impossible for a company to make money.
A signal tower plan that can be shortened to 11 microseconds can make the company $2 billion a year, but how long can the company live? It will only be shorter than 20 years.
The protagonist understands that, driven by capital proliferation, faster and faster trading methods will only appear. In the future, the trading time may even be negative. Sooner or later, the fiber optic cable plan that he has spent his own efforts will fail.
In the final ending of the movie, the protagonist has cancer, realizes the fact that the optical cable project has failed, chooses to destroy the optical cable and return to the simplest life.
It seems that the "Hummingbird Project" is about high-frequency trading that 99% of people have no access to, but behind it reveals the nature of capital. Some people complained that the protagonist's failure ended badly, and it was not logical for commercial films.
However, the demise is the only ending for capital.
In the face of reality, the movie is pale and weak.
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