High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems (Wiley Trading) (2nd Edition)
Format: PDF / Kindle (mobi) / ePub
ISBN 9781118343500 (Cloth)
ISBN 9781118420119 (ebk)
ISBN 9781118434017 (ebk)
ISBN 9781118416822 (ebk)
A fully revised second edition of the best guide to high-frequency trading
High-frequency trading is a difficult, but profitable, endeavor that can generate stable profits in various market conditions. But solid footing in both the theory and practice of this discipline are essential to success. Whether you're an institutional investor seeking a better understanding of high-frequency operations or an individual investor looking for a new way to trade, this book has what you need to make the most of your time in today's dynamic markets.
Building on the success of the original edition, the Second Edition of High-Frequency Trading incorporates the latest research and questions that have come to light since the publication of the first edition. It skillfully covers everything from new portfolio management techniques for high-frequency trading and the latest technological developments enabling HFT to updated risk management strategies and how to safeguard information and order flow in both dark and light markets.
* Includes numerous quantitative trading strategies and tools for building a high-frequency trading system
* Address the most essential aspects of high-frequency trading, from formulation of ideas to performance evaluation
* The book also includes a companion Website where selected sample trading strategies can be downloaded and tested
* Written by respected industry expert Irene Aldridge
While interest in high-frequency trading continues to grow, little has been published to help investors understand and implement this approach--until now. This book has everything you need to gain a firm grip on how high-frequency trading works and what it takes to apply it to your everyday trading endeavors.
guided the operations of trading firms until the technological revolution of the twentieth century enabled the current state of trading with rapid exchanges of information. As Figure 2.1 illustrates, over the past 100 years or so the computational speed available to traders has increased exponentially, while the cost of computing has been falling steadily since the 1980s, after reaching its peak. The price decline in computer technology has been spectacular over the past 20 years. A computer
market-on-close orders. 45 Market Microstructure, Orders, and Limit Order Books ■■ Limit risk. Most trading venues and broker-dealers now offer a range of orders for containing market risk. The order examples include hard and trailing stop orders, where the position is liquidated when a price move exceeds the predetermined threshold in the adverse direction (see Chapter 14 for more information on stops). ■■ Modern Microstructure: Market Convergence and Divergence The electronization of
board, as discussed in detail in Chapter 2 of this book. As a result, technology-enabled trading has become cost effective, and the ensuing investment into software has made trading platforms more accessible and more powerful. Additionally, the savings from lower errors in message transmission and data input, higher reliability of order execution, and continuity of business through computer code, deliver a business case for deepening financial firms’ reliance on their technology systems. The
fundamental price level is reached. The precise shapes of permanent and temporary MI functions have been subjects of competing theories. Breen, Hodrick and Korajczyk (2002) and Kissell and glantz (2002), for example, suggested that MI is a linear function of the order size (MIt ∝ Vt*).Lillo, Farmer, and Mangegna (2003), however, detected a power law specification ( MIt ∝ (Vt* )β ). The latest research on the topic (see Huberman and stanzl, 2004; and gatheral, 2009), however, reconciles the linear
documentation, and all other related activities is a full-time job. The proportion of time spent on each task outlined here varies with the stage of HFT business development, as shown in Figure 7.2. In the start-up phase, HFT businesses tend to be data and programming centered. In the ramp-up stage, testing, risk management, and monitoring take the majority of effort. Finally, in steady-state production, it is monitoring, compliance, and other administrative tasks that take the majority of time.