Questions tagged [algorithmic-trading]

Algorithmic trading is the process of taking in inputs such as market data, current news, and producing orders without human intervention.

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50 views

Futures vs. spot forecasting

If i have the belief that the futures lead the spot for price discovery, and I am able to forecast the future prices, given this forecast, what would be the best way to back out this number such that ...
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39 views

Can simultaneous trades happen?

Investigating about matching engines i found that none of them acknowledges the scenario when two identical orders arrive at the exact same time. I get that it is very unlikely for this to happen, ...
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118 views

Genetic algorithm development - chromosome stucture based on buys/sells

Creating a GA algorithm for intraday trading (e.g., futures ES, NQ) is more difficult than textbook examples for GA function minimization/maximization. Initially, I assumed the parameters for buys ...
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43 views

Practical approach to get average option IV

Is there a practical method to calculate some sort of average IV for each level of moneyness of equity options? I'm thinking of an algorithm to find mispriced options and do to so, we need to figure ...
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1answer
50 views

Realized and Unrealized Profit and Loss [closed]

https://www.tradingtechnologies.com/xtrader-help/fix-adapter-reference/pl-calculation-algorithm/understanding-pl-calculations/ What I want to know is, after Scenario 4 in this article how does the ...
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4answers
159 views

Backtest overfitting - in-sample vs out-of-sample

Recently, I read a great paper by De Prado et al. on backtest overfitting problem in Quantitative Finance titled Pseudo-Mathematics and Financial Charlatanism: the Effects of Backtest Overfitting on ...
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2answers
118 views

Implied volatility is returning infinity

I am trying to calculate implied volatility using javascript , I have following code ...
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1answer
114 views

How to understand microprice (aka, weighted-midprice)?

The definition of micropice is S=PaVb/(Va+Vb)+PbVa/(Va+Vb), where Pa is the ask limit-order price and Va is its volume, and similar for the bid Pb and Vb. The typical explanation for micropice is ...
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3answers
408 views

How is market buy order executed when meeting both market sell order and limit sell order?

Currently, we all know how market buy order is executed when meeting only limit sell order for time-priority rule.
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34 views

Custom normalisation from 0 to 20

I want to normalise from 0 to 20 For example right now I do normalisation with dynamic outlier exclusion , using median. So it works fine for some values like below ...
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1answer
32 views

Normalization of volume

suppose we have volumes every minute like below 100, 200 , 19, 0 , 200 , 12 , 100 I want to convert all these numbers to less than 10 , where 10 is max and 1 is ...
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51 views

Johansen cointegration Test for spread generation

I'm using the python statsmodels version of the johansen cointegration test and I'm looking for some advice on how best to generate the spread used within a pairs trading algorithm. For example I've ...
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1answer
107 views

How to validate trading strategy performance

I'm backtesting some algorithmic trading strategy based on the buy/sell signals: To validate the strategy performance I compare it against the buy-and-hold strategy of the same asset and calculate ...
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66 views

Textbooks on algorithmic trading

What are good sources and textbooks covering the theory and models behind algorithmic trading and strategies?
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48 views

Algorithmic trading strategies for financial derivatives

are there any strategies or considerations specifically designed for the algorithmic trading of financial derivatives, or textbooks that focus on this topic rather than underlying equities and ...
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1answer
76 views

Dollar bars in Advances in Financial Machine Learning book

Does anyone have use the dollar bars for building a strategy? I would like to know what ways you guys might be interested to set the dollar bars' parameter ( the dollar value ). I have thought of one ...
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3answers
268 views

Is a 'bad' trading algorithm useful?

This has been bugging me for a while. I've tried to make a trading algorithm and they usually perform poorly; but here's the hitch: If my algorithm suggests I long stocks a, b and c, and suggests I ...
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18 views

Zipline calendar spanning multiple days

I am trying to back test an algorithm using zipline and need to build a zipline calendar that maps to my brokers opening hours. My broker (FXCM) opens on Sunday at 17:00 and closes on Friday at 16:55. ...
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115 views

Algorithmic Trading Competition at MIT

Has anyone participated in MIT trading competition before(traders@mit)? Wondering what type of data are used-tick data or bar data-and are participants connected to a web socket? Are we allowed to ...
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1answer
186 views

Arithmetic Brownian Motion in Market Making papers

We often consider high-frequency market maker and suppose that the reference price is the arithmetic Brownian Motion: $dS_{t} = \sigma d W_t$ What is the difference $t_n - t_{n-1}$ in this case? Is ...
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1answer
106 views

Definition of „getting picked off“ [closed]

Is there a precise definition of what getting picked off means. In particular I want to check whether I have been picked off. How can I measure this quantitatively?
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56 views

What are your favourite benchmarks for signal (pre-trading strategy) backtesting?

In some situations, e.g testing the value of individual signals to be built into an ensemble method, it can be a bit too early to implement trading logic for the strategy needed to do a standard ...
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3answers
532 views

Position sizing in algorithmic trading

Good morning, I have a question, regarding position size in algorithmic trading. I have a strategy that every day generates signals for buying or selling positions on different stocks. I'm looking ...
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69 views

Has anyone _verifiably_ duplicated Yahoo's real time technical market indicators _numbers_? If so, how?

After spending the better part of a week trying to get a combination of Alpaca's API and Python libraries (alpaca_trade_api, pandas and ta) to duplicate the numbers produced by Yahoo! Finance's ...
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1answer
110 views

Does a combined Portfolio always performs like the average of the merged subportfolios?

I analyzed the historic data of the SP500 and tried a trading simulation on it. I picked the best 20 companies from SP500 for one year according to their ROE and put them in one portfolio. Let's call ...
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1answer
119 views

Building a semi-discretionary system

I've been investing for the last 15 years in a weird Buffett/Soros way. For the last few years I've been toying with the idea of modeling myself. I want to build a 'stock screener' that will be able ...
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60 views

2 ways to calculate profits, which both seem legit, but produce different results - what am I missing?

I'm trying to calculate this simple example with 2 ways which both seem legit, and getting different results. Way 1: at the beginning of day $t$, first reset the holdings to 0, then buy the number of ...
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1answer
46 views

Function price output hops around sometimes due to rounding

Say we have a function for estimating the fair price of a security. The function gives outputs rounded to the nearest 0.5 (that is, the raw output is not a rounded float, but can have a decimal part ...
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54 views

How to optimize a series of equations whose outputs are a variable of the subsequent equatinos

The basic question is, given $f(x) = y$ and $f(y) = z$, how can you find $x$ such that $z$ is at its maximum? I can optimize each equation independently, but I do not know how to optimize when ...
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1answer
87 views

How do you interpret Level 1 data to a list of transactions/trades?

If you have L1 data of a given security, what is the best practice to interpret it to a list of transaction/trades? Or, can we actually do so? Just FYI, it's not a project for school but a problem I ...
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1answer
1k views

Market Making Algorithm/ Strategies

I have been taking a "Trading Strategies" course, but the experience is awful as the instructor barely provides any learning resources. I have an upcoming evaluation on market making algorithm using ...
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1answer
53 views

Advantage to access “non-display data”?

There's data which is hidden from the exchanges called "non-display data"? For a standard stock day trader, is there an advantage to get that type of data? Can I be in the first people to see the big ...
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1answer
81 views

How can I calculate the amount of volume to use to ensure highest profit on an arbitrage trade of two Constant Product Market Making exchanges? [closed]

If there exists an arbitrage opportunity between two Constant Product Market Making exchanges, how can you confidently determine the maximum volume to use in order to ensure highest profit? I can ...
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2answers
281 views

Defining an objective function for machine learning task of trading

A simplified example. Given: asset's price time series fixed distances to stop and target. A function of these inputs has two possible output values: $1$ if price is likely to hit the target ...
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72 views

Backtesting :: Migration to Simulated / Real-Time Trading

I am relatively new to backtesting and I want to migrate my system to simulated trading via Amibrokers Interactive Broker's API. What I have been doing is setting trade delays such that when a Buy or ...
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2answers
187 views

Why Good forecasting != Good trading? [closed]

In AI for algorithmic trading: 7 mistakes that could make me broke the author talks about why good forecasting cannot equal good trading based on the strategy selected. While reading the article I ...
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0answers
55 views

Best features and tools over a short time interval [closed]

For a short time interval, what are the features having the most impact on a stock price movement? In the same direction, what are the better tools to tell us the price movement tangent? As tools, I ...
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1answer
110 views

Trading against a loser flow

Let's say we are getting a trade stream(instantaneous) of a group of traders that lose money. If we trade on their opposite side in a broker, is it guaranteed that we make money? Intuitionally it ...
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1answer
243 views

Algorithmic Trading: Normalization and Selection of Technical Indicators for Artificial Neural Networks [closed]

I study on algorithmic trading for a while based on technical indicators. I started to learn about neural networks and want to use technical trading indicators in this approach. However, I am not ...
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1answer
155 views

Retail Algorithmic Trading

Is it possible for the retail algo traders to take the same approach to risk management as the larger quant funds? is there a risk management budget imposed on the trader beyond that which they impose ...
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1answer
162 views

Algo trading execution simulation

Disclaimer: Brand new to high frequency algo trading. Background:I have tick-by-tick trade data for stock A and I have joined the price and volume data for each trade with the previous snapshot of ...
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2answers
251 views

definition of mid price in literature

In literature, the mid-price is often used along with the terms "fair value", "true value" among others. I take it alot of the times it means the same thing because the mid-price doesnt necessarily ...
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2answers
942 views

Quant Interview Course [closed]

I there any course on for quant that covers all the factors such as logical reasoning, puzzles, statistics, probability, time series analysis, portfolio management, options, machine learning, and ...
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2answers
82 views

Financial forecasting and Optimal order submission [closed]

For instance, If i have a model that can accurately forecast 3s ahead, would the trading logic be rather trivial? I have fit a series of distributions to L2 data and believe I have a fairly good grasp ...
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1answer
119 views

Bayesian trade probability with factors

I have a strategy Y which is influenced by some factors X1, ..., Xn (for example asset volatility, distribution of macroeconomic factors). At moment t0 I have historical distribution(prior) of X1, ...,...
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0answers
131 views

What is the logic of the eigenvectors of the Johanson cointegration test determining hedge ratios?

Reading Algorithmic Trading: Winning Strategies and Their Rationale, Ernie Chan and there is a short section about the Johanson test for cointegration where it is mentioned that the eigenvectors ...
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2answers
486 views

Cointegration and Ratio Pair Trading

I'm having some confusion doing Engle-Granger Cointegration test and then trade the ratio. Methodology: Run an OLS fit for A and B price time series without a constant. Therefore, $\hat{Y} = \gamma \...
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2answers
206 views

Explanation of VWAP

I have some questions on VWAP(volume weighted average price): 1) I understand that it gives the average trade price of an asset for a specific time period but why is it beneficial to know this when ...
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2answers
86 views

What exactly is meant by a parameter in the context of algorithmic trading? [closed]

I keep reading sentences along the lines of 'setting the right parameters is what makes an algorithm profitable and is one of the more difficult skills to master'. But what exactly is meant by a ...
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1answer
123 views

quant software for trading, one in all or pretty close to that

Trying to help to friend, who wants to establish automatic trading inside hedge fund. Is there any kind of one for all product with function of: data capture layer, data stores/management, analytics, ...