"Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said."
Bernard Madoff used to have a reputation like that. I rather suspect that the only way to be a winner that consistently is to do something as shady as what Madoff did.
After edit: noting downvote, I'll give one example of a possible shady practice in this industry mentioned in other comments on this thread. Not following the price time rule, which the trader mentioned in this thread says can happen "unwittingly," despite a regulation requiring the first order placed to be the first order filled.
It's important to note that for whatever definition of the word "shady" you're using, it is different than Madoff shady: Madoff's returns were fictitious, imagined from a series of hypothetical trades made in hindsight; these HF firms keep their assets in audited third-party broker accounts, so the returns are anything but fictitious.
What you are arguing is that because they are successful they must be shady, not that it is impossible to be successful and that therefore the claim must by shady.
can happen "unwittingly," despite a regulation requiring the first order placed to be the first order filled
You put quotes around "unwittingly" like you don't believe it. It really is unwittingly - the high frequency shop submits a bid at the same time as another place (or even afterwards), but the exchange fulfills the HF order first. See page 17 in http://sec.gov/comments/s7-02-10/s70210-129.pdf for how it occurs and page 18 for some real world examples.
In a given trade, the violation of the price time rule may be inadvertent, but evidently the pattern that this happens is well known. So I put the word "unwittingly" in quotation marks, not to show exactly that I don't believe it, but to adopt the exact language that was quoted in this thread. And now I raise the question: if the trades that violate the price time rule cease, how different would the performance of the traders be? Does this known phenomenon of violating the regulation have a predictable effect on some kinds of trades that is different from faultlessly following the regulation?
if the trades that violate the price time rule cease, how different would the performance of the traders be?
"Empirically there is a 1.7 cps difference in profitability for a posted share that is first in line vs one which is last in line" (pg 17 from the document linked above. You have read, that, right?)
There's what sounds like a reasonable proposal in that document too.
(I do not work in the industry, this is just a speculation) I believe the way algorithmic trading works is first the trader designs a strategy and estimates a success rate (from what I assume is past data). For example, a strategy may be successful (profitable) 53% of the time. This means that 47% of the time there is a loss. However if the 3% gain is large enough to cover the difference you're going to be up for the day.
Bernard Madoff used to have a reputation like that. I rather suspect that the only way to be a winner that consistently is to do something as shady as what Madoff did.
After edit: noting downvote, I'll give one example of a possible shady practice in this industry mentioned in other comments on this thread. Not following the price time rule, which the trader mentioned in this thread says can happen "unwittingly," despite a regulation requiring the first order placed to be the first order filled.