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9

Among matching rule, do not forget "auction calls", in most markets, you have one at the open and one at the close. To give you the main reasons to use one matching engine rather than another: Auction calls (i.e. fixings) are good to digest a lot of orders in a very short amount of time. It is why after a trading suspension, the trading starts with an ...


6

Making money is not the only reasonable objective to trading. Another common reason is to manage/reallocate risk. For example, this is exactly the objective of liability-driven-investors, such as pension funds. They're specifically trying to match durations of their liabilities. It doesn't matter if pension fund managers believe there are no inefficiencies ...


5

Definitely check out Quantopian and Zipline. Quantopian provides a free research environment, backtester, and live trading rig (algos can be hooked up to Interactive Brokers). The algorithm development environment includes really handy collaboration tools and an open source debugger. They provide tons of data (even Morningstar fundamentals!) free of charge. ...


4

Given one satisfies margin requirements anyone can short exchange traded options as long as local regulators permit (American retail investors at present are not permitted, for example, to trade futures options . As long as there is a market and one finds a willing counterpart nothing speaks against shorting options contracts. Some brokers might require a ...


4

I am not sure Dark Pools (DP) have been created to avoid "market manipulation". They have been created by firms because they found an advantage to create them (see Market Microstructure in Practice, L and Laruelle Eds.). The main reasons have been: spare market fees, for DP created by brokers (like UBS MTF); spare market impact, for block pools (like ...


3

This is an interesting topic. I assumed that you are looking for a public data source. Here is the margin data as reported by NYSE organizations (nyxdata) that offers a downloadable file. Here is the page of FINRA for Margin Statistics. This is an HTML page, I did not find a link to download a data file. You can validate the two sources against each ...


3

If by an individual investor you mean something like the average investor, then the answer is an unequivocal no: first of all, the average investor probably cannot sell put options. In order to sell put options, you have to be very experienced and climb up the option trading approval levels. Second of all, there is no such thing as risk that can be hedged ...


3

The formation of asset price bubbles, such as the recent US housing market bubble, is perhaps the clearest indication that markets are not efficient. Hundreds of bubbles have been documented for all kinds of traded assets; see the tulip mania for an extreme case. Many practitioners also routinely use trading strategies such as momentum or reversion to the ...


3

Of course, optimal control is at the core of math finance. Take few applications: Option Pricing: you have an exposure to a time dependent combination of market factors; you have some knowledge of their dynamics. They are partly deterministic, partly stochastic (i.e. random). At each "time step" you can adjust your portfolio at a given cost. Your goal is ...


3

The problem of when to exercise an option with Bermudan features is an optimal stopping problem. I have a done a lot of work on how to do these things when the state space is high dimensional. There are various more complicated problems where the contract is more difficult eg swing options.


3

In the long term you will underperform buy & hold because you need an accuracy of at least 65%. See these papers for more: Bauer, R.; Dahlquist, J.: „Market Timing and Roulette Wheels Revisited“, CFA Institute, 2012. http://www.cfapubs.org/doi/pdf/10.2469/irpn.v2012.n1.10 Sharpe, W.: “Likely Gains from Market Timing”, Financial Analysts Journal, ...


3

It's not bad but you have to backtest the method out-of-sample. Say you have discovered an indicator that works 100% in history, you still cannot be sure if it works next time. Another advise is you might want to investigate the distribution of loss when your system fails to work. If your system delivers 1% every time you trade, and loses 10% each time it ...


3

Here is a collection of papers. The general idea is that the market has investor classes that share different expectations. When in bubble territory, many investors generally agree that assets are overpriced, but they still invest in expectation of more investors entering the market (the greater fools). There are also sophisticated investors who know assets ...


3

The opening and closing prices are set during an auction. If there are overnight news, then the opening auction will reflect information which wasn't there during the closing auction. And even without the auctions, the last traded price yesterday results from different orders than the first traded price today.


2

Have you checked White's "reality test" (White H. A reality check for data snooping. // Econometrica. 2000. № 68. С. 1097–1126.)? Anyway, when you use Monte-Carlo, you always have a variation of "double hypothesis" issue, noted by Fama: first hypothesis is that your model of the market is right, and the second - that trading rule you test (against your ...


2

It's unclear what type of trading you are referring to (day trading sort of?). Also I'm not familiar with the aforementioned paradox. However, I think it's weird to say that you can't make money from trading, the semi-strong (strong) from of the EMH only states that the current share price incorporates all publicly (and non-publicly) available information. ...


2

I think it will also depend on the amount of the orders you will entering. In FXInside it will also depend if you are just aggregating or using a HUB, and even if you use the HUB it will depend if you are enable to "make liquidity" otherwise you will be only sending an agressive watch order waiting a market move. I don't have any number to share with you, ...


2

I answered @Anilca's question in SO (and the answer was accepted) I summarize my answer with the working solution: public class Aroon : IndicatorCalculatorBase { public override List<OhlcSample> OhlcList { get; set; } private readonly int _period; public int Period { get { return _period; } } public Aroon(int ...


2

1) Spurious autocorrelation of non-synchronous trading data was analyzed in this article: http://www.amazon.com/An-econometric-analysis-nonsynchronous-trading/dp/1245789457 During some time intervals a lot of trades occur and during some nothing happens(so prices are stale). So serial correlation of traded prices may be present but this may be due to stale ...


2

Position here is the residual amount of one or other currency at the end: You gave us: Time | Amount | Rate | t1 100 1.2636 t2 -1000 1.2599 t3 200 1.1612 Assuming the Amount is amount paid in USD, and the rate is EUR/USD: Time | Amount | Rate | EUR balance | USD balance t0 0 0 t1 ...


2

It depends on the derivatives exchange but e.g. Eurex exchange can also be used by retail investors as long as they are qualified (concerning their max. risk level) and their bank offers access to it (some at least do that).


2

Of course you can sell options and you can certainly sell options on most major indices. Thinkorswim (TDAmeritrade) offers and excellent platform. Moreover, one can short options without "full" account privileges provided a defined risk trade is entered (such as an iron condor or call spread)


2

Directional forecast is insufficient. You could have a signal that has 100% accuracy and you would not necessarily be able to profit from it because of transaction cost, implementation etc.


2

It's not unusual to find a financial time series with positive trend samples biased between 55-60%, depending on the period sampled. Stocks tend to have an upward drift over the long run. When you account for the drift, I would say, that number is really not much better than chance. A better way to verify your question would be to make certain to build ...


2

There is trading happening overnight. A nice paper is Dong Lou et. al: http://personal.lse.ac.uk/loud/OvernightMom.pdf They explain the overnight trading and actually document that most known anomalies occur on that period.


1

Actually, a lot of finance and economics are centered around optimal control problems. Traditionally, most economies are modeled as dynamic systems. In finance, portfolio optimizations, advanced option pricing etc are all optimal control problems. You could look at the book Non Linear Option Pricing, it has a lot of optimal control problems.


1

It appears that these are actually all the same thing. overnight inventory, end-of-day holdings, end-of-day net position, it all identifies the same thing. The different terminology arises from how, technically, an account's inventory is reconstructed using order book message data. However, they all identify the inventory at market close, i.e. the ...


1

Use your total wealth allocated to the trades as denominator. Total wealth allocated would include all collateral. In this way you (or your broker) make sure that the denominator is always positive. Presumably this would also reflect what you really want to track. The only problem that remains is what amount of your wealth needs to be allocated. But this is ...


1

Every match that hits the tape from the perspective of displayed ECNs is a market order matched with a limit order. You can think of this in terms of makers and takers. If I want to buy MSFT at 51.00 and post a limit for that price 3 microseconds before you post your limit to sell at 51.00 then I am the maker and you are the taker. And your sell order will ...


1

If you are after treasuries, you can check http://www.newyorkfed.org/research/staff_reports/sr381.pdf which discusses trade impact on BrokerTec. If you are after equities, the literature is enormous, you can pretty much google for "trade impact limit order book" or smth similar. In practice, it's an empirical approach: you put all the factors, that seem ...



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