# Market Making Strategy

In the article A High Frequency Trade Execution Model for Supervised Learning, Matthew Dixon refers to two Market Making Strategies MM1 and MM2 without specifying their true natures.

Definition 4.0.1 (Strategy) : A strategy is a $n$-vector function $L: \mathbb{R}^{+} \times \mathbb{Z} \cap (-m, m] \to \mathbb{Z}^{n}$ of the form $L_{t}(\hat{Y}_{t})$, where $t$ denotes the time that the trade is placed. Based on the predicted value of $\hat{Y}_{t}$, the strategy quotes on either the bid and ask at one or more price levels.

Definition 4.0.2 (Market Making Strategy) : A market making strategy is the pair $L_{t} = (L^{a}_{t}, L^{b}_{t})$ representing the quoting of a bid and ask at time $t$.

Can you tell me which Market Making Strategy (MMS) he is referring to? Otherwise, what would be a good MMS in relation to the previous definitions? Any article?

Unfortunately, with the info given, he isn't referring to any specific MMS at all. He is actually just defining some basic properties that are pretty straight forward.

In Definition 4.0.1 & 4.0.2 he defines an n-vector in a bounded area and states that a strategy is just "something" execute at some time "t" given some prediction. He follows by including some bid/ask variables to his previous statement, this doesn't tell us much (most of this you already know), hence the reason why he isn't specific about anything.

Here is a list of some well known types of HFT/MMS with lots of online resources:

1. Order flow prediction HFT strategies
2. Execution HFT Strategies
3. Liquidity Provisioning – Market Making strategies
4. Automated HFT Arbitrage strategies

For those who are new to HFT, I suggest reading this quick article, it breaks down HFT and how it works without getting too complicated:

https://www.quantinsti.com/blog/automated-market-making-overview/

• What are the best best strategy for low number of transactions per day? For example, the number of transactions may approach that of a trader experiment and not that of a bank or fund manager. Commented Apr 23, 2018 at 0:30