From international high frequency trading to the trenches of crypto
Ori Cohen, co-founder of Efficient Frontier, has under his belt more than a decade of developing algo-trading systems , and was one of the first heavy hitting professionals to pioneer the cryptocurrency markets. For the first time Ori Cohen shares on the record his takes and insight on algo-trading and crypto markets, his surprising background and the not so secret secrets of the trade.
What do you think allows companies to be successful in algo-trading?
Good question. Being persistent, a strong network with other players in the industry, having smart people and putting in hard work. Being persistent is a lot of it, really.
Do you believe in technical analysis? It’s a hot topic for my friends to argue about.
Technical analysis is a very broad term, the question is what kind of technical analysis. At the end of the day algo-trading is also technical analysis. I believe in checking the theory. No matter what the theory is, check it before you run it.
If everyone believes in the same theory will it stop working?
Not necessarily. It can work… it can even work too well. There’s an interesting story, you should read about Black–Scholes. Something that worked too well. Everyone trusted it until it fell apart, and since then it’s totally changed. At the end of the day, markets are people, not a black hole.
Do you think every market gets manipulated?
Generally? Yes, but here [crypto markets] it has a bigger influence.
How does your typical day at work look like?
Sometime I code, it depends on the period. If you’re involved in research it’s more amorphic: you don’t know where you’re going, you keep going until you find something interesting. Or you say, enough- I went too far, and then you go back.
Background: Everything you wanted to know about Ori
How did you get started in algo-trading?
By accident. I started as a technologist, a regular programmer, back end, front end. We did a lot of billing systems at Broad Digital, that’s were I learned something about coding with money. Afterwards we did billing optimization systems. It was the early 2000’s and the cell phone bills used to be crazy high, remember? Today you could buy a VPN for that money. Then we started experimenting with option algorithms and after we sold the software company, a year later we started getting results with the algos, and ended up doing algo trading for 11–12 years in the options markets. And now we’re in crypto.
When you were young, want did you want to do when you grew up?
I was a bad student and my father asked me what I want to be when I grow up, I told him- I don’t need good grades, I’ll be a ping-pong coach (I was a ping-pong player when I was young).
So how did you become a programmer?
I studied physics and computer science, and at the university I got into computers. I like to work, it really interests me. But I was a bad student at school and at Uni. When I started working things changed. I really loved working, and learning on the job. I wasn’t a computer programmer from age 6 like all the geniuses here, if that’s what your asking.
Where were you in the 2008 financial crisis?
We were just getting started working on the algo-trading. In 2011 there were also sharp drops and we made a lot of money off simple arbitrages in Tel-Aviv [Stock Exchange]
How has the world of the Tel-Aviv Stock Exchange changed over the last decade?
The interest in the Tel-Aviv market has faded, so over the last decade the volumes have been completely stagnant .It’s a more global market now and the Tel-Aviv exchange doesn’t have much to offer that you can’t find in the United States.
Markets, Money and Crypto
How do you compare the sphere of crypto to the world of the traditional stock exchanges?
The behavior of the crypto market itself is much younger, and the people are younger and a little more anarchistic. The derivatives that are coming in right now are like a coming of age, it’s a tool for more mature institutions.There are still a lot of financial tools missing: options, ETFS, funds, but the exchanges are excellent- they copied everything they needed from the traditional markets.
Is Bitcoin in a bubble? Or at its real value?
Value is just supply and demand. I don’t think it’s at its real value right now, but I don’t have any idea what it should be at. It has potential thought, and in 10 year I think it will still be around.
What is the connection in your opinion between money and politics?
It’s obviously very connected, no question. In Bitcoin you can’t see it yet, but you can see it in the fact that the government bails out the banks for example.
And one last question
What do you think motivates people to succeed in the world of trading? Is it easier to make a fortune?
I don’t know if it’s easier. I think the fact that you have direct contact with the money so you have direct contact with your success. You don’t need to get feedback from people about what you did or didn’t do, whatever you produced is what there is.