I am looking for references on the architecture of automated trading systems and the trading algorithms behind them. I am more interested in system development than analysis. A couple of books I found are Building Automated Trading Systems by van Vliet and Quantitative Trading by Chan. Any other tips or references on this matter would be appreciated.
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asked Aug 21, 2011 at 6:08
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2$\begingroup$ You already mentioned some very good sources, can you be more specific as to what else you are looking for or what is missing from those books? $\endgroup$– Tal FishmanCommented Aug 21, 2011 at 12:41
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2$\begingroup$ What type of strategies are you interested in trading? How long do you want to hold positions? What products / asset classes will you trade? More details will help $\endgroup$– Joshua ChanceCommented Aug 21, 2011 at 14:31
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$\begingroup$ @sheegaon Thanks for your comment. At this point, I don't have specific requirements yet but I wanted to collect general ideas on building such a system. To be honest, I didn't know those I have are good resources until your comment. $\endgroup$– Tae-Sung ShinCommented Aug 21, 2011 at 17:43
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$\begingroup$ @Joshua Chance, Thanks for your comment. As I told to sheegaon, I don't have specific requirements yet but your questions are already helping me to understand the system. Maybe it's a good idea to get the specifics first? $\endgroup$– Tae-Sung ShinCommented Aug 21, 2011 at 17:48
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$\begingroup$ I edited the question a bit to focus on development, since that seems to be your aim here. Nevertheless, it would be helpful to get more details on what you are developing so we can provide the best answer to your question. $\endgroup$– Tal FishmanCommented Aug 22, 2011 at 14:20
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6 Answers
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In addition to Chan's Quantitative Trading, I have also found the description of trading systems in Rishi Narang's Inside the Black Box to be informative and interesting. There are a few chapters there that give some details on system development, but they are very broad overviews.
answered Aug 22, 2011 at 14:25
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$\begingroup$ First, thanks for editing my question. It's much cleaner. I will surely find the book. Thanks again! $\endgroup$ Commented Aug 22, 2011 at 14:36
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$\begingroup$ Inside the Black Box is a great book! It lays out the different systems of an automated trading system. $\endgroup$ Commented Aug 22, 2011 at 22:50
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$\begingroup$ Accepted this answer mainly because Narang's book looks perfect for people like me. But all of the answers will be surely valuable. Thanks all. $\endgroup$ Commented Aug 24, 2011 at 16:45
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DSpace@MIT - High frequency trading system design and process management (non-printable)
This thesis provides a detailed study composed of high frequency trading system design, system modeling and principles, and processes management for system development. Particular emphasis is given to backtesting and optimization, which are considered the most important parts in building a trading system. This research builds system engineering models that guide the development process. It also uses experimental trading systems to verify and validate principles addressed in this thesis. Finally, this thesis concludes that systems engineering principles and frameworks can be the key to success for implementing high frequency trading or quantitative investment systems.
It's just a thesis and you should not consider this as a state of art which is used in a production environment on Wall street. However it's at least something to begin with and become familiar with some approaches which are conisdered in this work.
answered Aug 22, 2011 at 8:31
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$\begingroup$ Yes I agree with you that might be one of them I need. Thanks so much! $\endgroup$ Commented Aug 22, 2011 at 14:37
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Additionally I would recommend Evidence-based technical analysis by David Aronson
It explains the whole process (including the complete statistical background) of rigorously setting up the basis for your trading system.
See for a short summary of important points here: CXO Advisory
See for a review here (including some practical advice and programs how to use the recipes in the book): Automated trading system (This whole blog is btw a good starting point on its own for your endeavor!)
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I just finished "High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems" by Irene Aldridge -- I think it provides a very good overview of HFT, considerations of different aspects of trading systems, and good introductions to many formulas and research.
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6$\begingroup$ Seriously? Anyone who's worked in this space will tell you Irene Aldridge is a hack and her book is drivel. $\endgroup$– HansiCommented Aug 24, 2011 at 22:53
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$\begingroup$ Hansi, I'm always looking for more books on the subject. Suggestions from anyone workin in the space are welcome! $\endgroup$ Commented Aug 24, 2011 at 23:24
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3$\begingroup$ Excluding the ones mentioned above (except for Chan's don't like that one either) you could check out Michael Durbin's book as an intro to HFT. It's pretty good. For algo in general + DMA Barry Johnson's book is great. $\endgroup$– HansiCommented Aug 25, 2011 at 12:34
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In terms of system design, I learned the most by reading the developer guides and exchange connectivity specs for various exchanges. You probably won't be connecting to these directly, but understanding how the sessions, book updates, snapshotting works, and what events can occur is very useful.
Also, google for the Max Dama automated trading PDF, which gives a brilliant and concise overview of what's involved in building a working automated trading system, including architecture, and a who you are vs what you need to build table.
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Check out the following link with videos: I believe Richard Olsen organised the first high-frequency trading conference: http://www.birs.ca/events/2013/5-day-workshops/13w5008/videos
