Attempting to profit from short-term fluctuations in a security's price as opposed to investing in the security for use or income.
1
vote
1answer
107 views
Add transaction costs to prediction
An algorithm predicts price movement by some certainty and it invests proportional to the confidence level. Predictions range from -1 to +1, -1 meaning sell for a value of ...
-5
votes
0answers
95 views
Basic Trading Strategies based on mean-reversion / momentum [closed]
Can anyone give me some basic trading strategies which based on the theory of mean-reversion (like the bollinger band strategy)? Also, is there any basic trading strategy based on momentum trading? ...
3
votes
1answer
133 views
How to determine ratios for mean-reverting basket
Suppose I have a basket of 3 securities A, B, and C. I believe that the basket is cointegrated and I want to create a mean-reverting trade. I fit the model:
...
0
votes
2answers
290 views
How to use PCA for trading
Can anyone give me a few pointers of how to approach using PCA for trading? In particular, it seems to me, PCA is useful for selecting a subset of a portfolio of stocks(or other) rather than trading ...
2
votes
1answer
137 views
What exactly is an ISO order?
I have been looking this up and I feel like I keep running into different definitions. My understanding is that an ISO order is one which will get filled with the displayed quantity in a particular ...
-3
votes
0answers
86 views
Holt Winters Double Exponential Smoothing [closed]
I am looking out for Holt Winters Double Exponential Smoothing implementation using VBA Code.
I have searched everywhere but all I can observe, It comes with Excel Add-In. I am looking out for actual ...
-1
votes
1answer
141 views
High-Frequency Traders and Front Running: What order types are they using? [closed]
I often hear in the news that High-Frequency Traders can front-run incoming trades because they are faster at acquiring information and to execute trades. I also read that speed is only a necessary ...
19
votes
8answers
5k views
Digital Signal Processing in Trading
There is a concept of trading or observing the market with signal processing originally created by John Ehler. He wrote three books about it.
Cybernetic Analysis for Stocks and Futures
Rocket Science ...
2
votes
3answers
494 views
How to distinguish between different types of algorithmic trading
Algorithmic trading involves the use of algorithms to optimally execute trading instructions. Then there are algorithms which initiate trades, based on various quantitative strategies (e.g. pairs ...
11
votes
4answers
2k views
Volatility pumping in practice
The fascinating thing about volatility pumping (or optimal growth portfolio, see e.g. here) is that here volatility is not the same as risk, rather it represents opportunity. Additionally it is a ...
4
votes
3answers
205 views
How to implement a long-term trade on oil?
I believe that one of the most compelling case of long-term trade is the long position on oil. Fundamentally, it seems quite clear that demands is going to grow in the future as emerging markets start ...
2
votes
3answers
192 views
Is it worth preserving orderbook structure when building it from individual orders?
Say I'm building an order book and two bids come in at price $p$ and volumes $v_1$ and $v_2$. Which option is better
To store the order as $\{p, v_1+v_2\}$ or
To store the order as $\{p,v_1\}$ and ...
7
votes
2answers
430 views
Applications of Fourier theory in trading
What are fashionable applications of Fourier analysis in trading? I have heard vague ideas of applications in High Frequency Trading but can somebody provide an example, maybe a reference?
Just for ...
0
votes
2answers
142 views
Interpretation of PCs
I have computed PC1 and PC2 wts on future contracts derived from cumulative log differences. How can I use them to get back the theoretical price of each contract using those 2 pcs? Thanks in ...
16
votes
7answers
1k views
How to design a custom equity backtester?
I was thinking about writing my own backtester and I realize I have to make some assumptions. So I was hoping I could post what I am planning on doing and hopefully some of you can give me some ideas ...
6
votes
4answers
458 views
What are the options for a mathematician to break into QF without working for a fund?
I have a degree in mathematics, and I've worked as a statistician and done some programming work. I'm very strong in my math/stats/programming background and have browsed some QF books, and I'm very ...
0
votes
1answer
152 views
Selecting timeframe for time series analysis
In technical analysis, we may use confluence of direction for 3 timeframes to roughly gauge bias of market now.
Similarly, if we use time series forecasting methods to predict(say daily data-whether ...
2
votes
3answers
653 views
Is MATLAB-generated code good enough for use in live trading?
I know that MATLAB has mechanisms for generating code, but I've never used them. Have you? If you have - is it good enough (=fast enough, I guess) to be used in live trading systems? Anything one ...
15
votes
5answers
2k views
Skew arbitrage: How can you realize the skewness of the underlying?
It's not clear to me how to realize skewness. In other words, how do you implement skew arbitrage? There seems to be no well-known recipe like in volatility arbitrage.
Volatility arbitrage (or ...
0
votes
3answers
1k views
What are the common trading systems for hedge fund automated trading?
Is there any common trading system that is implemented by hedge fund, especially for equity or forex automated trading? I know some big names like Sungard and Bloomberg. Is there any other choices ...
1
vote
2answers
232 views
.NET statistical packages recommendation
What open source or commercial .NET statistical package would you guys recommend? I am doing statistical arbitrage in options. The functions I need mainly are regressions, optimizations..etc. It would ...
2
votes
2answers
322 views
Does Interactive Brokers (IB) have a Web friendly API?
The requirement I am given is to implement a web ppplication which utilizes Interactive Brokers's API to fetch data. I went through the IB API web page and came across two viable methods: TWS and IB ...
1
vote
2answers
435 views
Evaluating forecasting algorithm
I am trying to evaluate a forecasting algorithm for stock price prediction. However, the performance of the algorithm may be very much tied to the trading strategy.
Is there a systematic way for ...
4
votes
2answers
547 views
How to calculate optimal standard deviation bands for trading?
I am trading with standard deviation bands (6 bands) on de-trended data. How can I find the most profitable signals with neural network or GA with standard deviation bands? Should I first find the ...
-1
votes
1answer
298 views
Regression and its application [closed]
I am currently working on model where I am using 21 period moving regression line and RSI to gauge trading opportunity. I am more interested in enhancing this using rest of regression parameter such ...
8
votes
4answers
956 views
What kind of specialized hardware is used in trading?
What kind of computer hardware, in additional to the 'conventional' fare, is actually used in trading? And what languages is it typically programmed in? I'm interested in ASICs, FPGAs, that sort of ...
5
votes
1answer
735 views
What is “high frequency quoting” or “quote spam”?
What is so called "high frequency quoting" or "quote spam" in the context of high frequency trading? And why do some people consider that as a problem for the market?
2
votes
1answer
114 views
Analyzing an incomplete set of trades
Say I have access to logs of all trades executed on an ECN with the price maker and taker named.
These traders are only executing some of their flow on this ECN (anywhere from 5%-80% of their ...
10
votes
2answers
341 views
Exploiting breakdowns in correlation of estimated volatility
In the attached image I have a plot of the rolling correlation of 90-day historic volatility (using the Garman Klass estimator based on Sinclair's Volatility Trading) of JPM v. the S&P. As can be ...
5
votes
1answer
275 views
With there being such a high demand for electronic trading or just trading in general why are market hours so limited?
I am curious why a lot of market hours are something like 9 to 3 or 9 to 4 pm when there is such demand and so many prop shops and more out there. I know certain markets are continuous trading but a ...
6
votes
1answer
130 views
Estimate price movement per unit of volume for daily data
I'm working on backtesting a number of stock trading strategies and need to estimate how much the execution price will likely deviate from the historical close price for that asset using daily data; ...
-1
votes
1answer
871 views
Can end-to-day trading be profitable? If not, why? [closed]
Many academics argue that end-to-day trading, where you go long or short before opening and sell your security at the end of the day, is not profitable. Various explanations are given for this ...
11
votes
2answers
2k views
How do I find the most diversified portfolio, or least correlated subset, of stocks?
I have a trading system that chooses top 10 stocks in Nasdaq 100 ranked on relative strength and some other factors. However, I'd like to take positions in only 5 of these 10 stocks based on how ...
12
votes
2answers
1k views
statistical arbitrage option overlay strategies / volatility trading
Here's an interesting trading puzzle that I would love to get the community's input on.
Let's say there exists an alpha signal that does a good job of sorting equities expected excess returns over ...
22
votes
3answers
4k views
How can we reverse engineer a market-making algorithm (HFT)?
Consider a market participant $A$ who is mechanically following an automated liquidity providing algorithm (HFT) in a number of large cap stocks on a specific exchange.
Assume furthermore that we are ...
3
votes
2answers
841 views
GJR-GARCH Model In R
Any idea how to estimate GJR-GARCH models in R? Is there any particular library like fGarch that supports such models?
1
vote
1answer
306 views
Arbitrage between markets
I'm trying to understand how arbitrage works, but I'm having some difficulties based on some restrictions:
I have markets A, B and C.
The currencies that are traded are X <-> Y, and X <-> Z.
...
7
votes
3answers
1k views
Order submission strategies of a rational market maker?
Consider a market maker that has decided to try to make a round-trip trade in stock A in order to capture the bid-ask spread.
Assume furthermore that he has no current inventory in the stock A. To ...
14
votes
4answers
1k views
How are risk management practices applied to ML/AI-based automated trading systems
A potential issue with automated trading systems, that are based on Machine Learning (ML) and/or Artificial Intelligence (AI), is the difficulty of assessing the risk of a trade. An ML/AI algorithm ...
4
votes
1answer
264 views
Is there any measure that is a non-trivial combination of VWAP and TWAP?
Is there any measure that is a non-trivial combination of VWAP and TWAP? For example:
\begin{equation}
\textrm{VTWAP} = \frac{\textrm{VWAP}+\textrm{TWAP}}{2}
\end{equation}
I'm thinking about ...
0
votes
0answers
472 views
What is the current state of the algorithmic trading research? [closed]
Searching for 'algorithmic trading' through scholar.google.com reveals a large list of trading strategies, related on topics like the liquidity of markets, volatility modelling, volume modelling, the ...
5
votes
3answers
346 views
Means of inferring trading algorithms from competition trade data
I'm analyzing trades from several participants in a trading competition, and I was wondering - are there known mechanisms for analysis and inference of the logic in a set of trades done by one ...
3
votes
1answer
1k views
C++ training from scratch to quantitative trading? [closed]
I have been trading for decades, and I have a solid knowledge of technical analysis but also VB as professional programmer.
I would like to start learning C++ from scratch, then specialised in C++ ...
2
votes
0answers
159 views
Can a higher P/E ratio be beneficial under certain circumstances? [closed]
I am new to investing. I understand that the P/E ratio along with other data can be used to determine whether a stock may or may not be undervalued.
Are there situations where a HIGH P/E is actually ...
4
votes
3answers
268 views
Given markets usually fall fast and rise slowly, are there trading mechanisms to take advantage of this?
Per a previous question on this topic -- markets generally fall fast and rise slowly: what options strategies or other strategies can one use to take advantage of this common occurrence?
6
votes
2answers
1k views
Which algorithm should I look into to kick off my research in algorithmic trading? [closed]
I have recently undertaken a research into automated algorithmic trading algorithms.
The aim of the research is to focus on studying algorithmic trading and trying to improve a basic implementation ...
10
votes
3answers
2k views
How to combine multiple trading algorithms?
Is it possible to combine different algorithms so as to improve trading performance? In particular, I have read that social media sentiment tracking, digital signal processing and neural networks all ...
7
votes
1answer
386 views
What are the most common/popular exotics in the interest rate markets these days?
By "exotic" I mean anything that is not a plain vanilla swap, swaption, cap or floor. Also any IR hybrids if appropriate.
Possible examples would be:
CMS and CMS spread options
Multi-callable swaps
...
7
votes
3answers
567 views
What strategy would benefit most from having the fastest connection to the exchange?
Imagine that you have the fastest connection to the exchange (receive quotes 1 ms earlier than everyone else) for both stocks and derivatives.
How would you benefit from this?
Of course almost any ...
7
votes
3answers
298 views
Is there data on market participants at a particular moment?
I am looking for data on market participants at a particular moment (or some proxy/approximation). For example, how can I tell whether mostly big players and HFTs are dominating the market in ...
