Markets Media Online 9/30/10
Although many firms are peddling trading technology, Titan Trading Analytics is unique in that it is its own customer, drinking its own coffee, so to speak. The company has opened an institutional proprietary trading desk in New York, comprised of a small group of traders utilizing Titan’s automated trading technologies and money management modeling.
The internal prop trading arm will be separate from the trading solutions part of the company, so there is no conflict of interest, Eric Davidson, Titan’s vice president of research and trading, told Markets Media. “We’re completely neutral. We’re not an executing broker and we’re not competing for institutional order flow.”
The prop trading arm is a natural outgrowth of Titan’s business model, which is built on providing an automated trading platform for prop traders and hedge funds designed to capture and analyze real-time market tick data, and then execute trades based on the algorithmic calculations.
The central idea is that humans revert to instinctive behavior, especially during periods of high volatility, and this needs to be factored into trading strategy. Current quantitative strategies do not factor in the power of raw emotion. Human reaction often controls how markets are traded: greed, fear, euphoria, panic and irrational exuberance are fully embedded into the DNA of financial trading.
These cognitive pitfalls can be destructive to trading success. The burden of extreme emotion can directly influence the trader’s perception of risk, causing them to blow out of positions or enter at just the wrong time. “By automating much of the workflow of the trader, from the idea sourcing to the trade management we help the trader employ a rules-based approach,” said Davidson.
Titan’s flagship product, TickAnalyst, receives real-time signals from Titan’s Trade Recommendation Engine (TRE) and, using a set of unique behavioral trading models, performs tick-by-tick analysis of the equities and currencies markets which are optimized over a proprietary ten year tick database.
A suite of automated strategies takes advantage of these known behaviors by issuing trading signals to the trader. TickAnalyst then provides a way to automate these trade ideas when known events with a high probability of success converge, enabling orders to be executed even in the face of adversity when emotions run highest.
“Our clients on the asset management side are high net worth individuals who understand the benefits of some forms of automation,” said Davidson. “They are not interested in high-frequency trading strategies. They understand that markets have different cycles and are willing to maintain patience while the models seek longer term opportunities.”