Has anyone here used technical analysis (think MACD, RSI) in HFT setting and can comment on the usage as an entry/exit signal?
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2 Answers
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Quantitative Finance is different from Technical Analysis. The essense of the difference is succinctly summarized in "Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation" article by Andrew W. Lo, Harry Mamaysky and Jiang Wang:
Technical analysis is primarily visual, whereas quantitative finance is primarily algebraic and numerical. Therefore, technical analysis employs the tools of geometry and pattern recognition, and quantitative finance employs the tools of mathematical analysis and probability and statistics.
The above is true, in particular, for the indicators mentioned by you. For example MACD's description at Investopeida.com has the following passage:
The MACD is often displayed with a histogram which graphs the distance between the MACD and its signal line. If the MACD is above the signal line, the histogram will be above the MACD’s baseline. If the MACD is below its signal line, the histogram will be below the MACD’s baseline.
So it is unlikely that many people here have ever used technical analysis in general and in HFT settings in particular.
Please also have a look at How to identify technical analysis chart patterns algorithmically? question and further references therein
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HFTs use market microstructure analysis to construct their own trading signals. MACD/RSI etc are all timeseries based indicators, whereas HFT data is not uniformly spaced so if those signals had any edge (which I find extremely unlikely), they would be unsuitable anyway.
