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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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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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43 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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56 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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169 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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48 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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66 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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187 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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56 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
158 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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42 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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98 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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166 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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85 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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77 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
134 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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255 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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69 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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70 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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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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223 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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83 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
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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
102 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, ...
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142 views

Position Sizing Algorithm for Multi Asset Portfolio

I'm currently working on a position sizing algorithm for my trading system. By combining fixed ratio money management and setting the stop loss based on the current ATR value I receive reasonable ...
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1answer
134 views

Historical tick data level 1 and level 2

I am a software engineer and want to run some simulation of over historical market data . I am pretty new to finance and trading world. To automate some of my strategies I would like to run some back ...
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529 views

Does Chan use the wrong state transition model in his Kalman filter code?

In his book, Algorithmic Trading: Winning Strategies and Their Rationale, Ernie Chan shows how to use a Kalman filter to improve the returns of a cointegrated portfolio. Recall that the state equation ...
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1answer
281 views

What's the rationale behind having several orders on each each side for market makers

I've been browsing market making codebases and I've noticed most of them tend to create multiple orders on each side. Originally I thought having orders on each side is an advanced approach but here'...
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1k views

Programmatically detect RSI divergence

How can I programmatically detect bullish and bearish RSI divergences? A bullish divergence occurs when the underlying security makes a lower low and RSI forms a higher low. RSI does not confirm the ...
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List of long-Term Support & Resistance in forex or stocks [duplicate]

I'm looking for a study of historic long-Term Support & Resistance in forex or stocks. If possible with their level of strength (strong, medium...). Example ...
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1answer
216 views

approach on trading algorithm using machine learning [closed]

let's say I am supervising a algorithmic trading project using machine learning. I don't have involvement in the technical side but am involved in the high level planning. the style is likely ...
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1answer
74 views

Adding a new strategy to an existing portfolio

I wanted some help in looking for suitable articles/literature. Suppose an investor has a bunch (bouquet?) of quantitative strategies already generating trading signals for him. If he comes up with a ...
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1answer
123 views

Understanding Forex Positions

I am new to forex trading and using an Oanda free practice account to play with it. However, I'm not understanding a few things. When I buy or sell a currency pair, am I buying/selling a currency or ...
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1answer
592 views

Google Finance API for historical price data analysis?

I've been trying to build a trading algorithm and fooled myself into thinking it worked. Turns out, Google Finance quite often returns the wrong data. Not "sorry, we couldn't return data for this ...
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1answer
583 views

Understanding Cover's Universal Portfolio Algorithm

I am trying to implement the Universal Portfolio algorithm strategy inspired by the paper by Professor Cover from Stanford. At the moment I am trying to understand the underlying logic of the ...
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1answer
966 views

3rd party API like IBPy for Interactive Brokers python API?

I've read some tutorial of the Interactive Brokers API's TWS and it seems very low level and requires so much work just to place a simple market order. I've come across IBPy and just wondering how ...
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How do I officially track the performance of my quant strategy? Do I need to be GIPS compliant for my performance to be legitimate?

I have a quant strategy that I want to implement in order to establish an official track record, but I'm not sure what I have to do. I have about $100k to set this thing up and would appreciate ...
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2answers
149 views

Evidence that supports the assumption that prices are random processes

I have heard that the price of stock or future changing over time is a random process, namely, a martingale, and no one can have an edge. Is there any evidence supporting this assumption? Why do so ...
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294 views

How to properly set strategy parameters and select portfolio

I have the following strategy pipeline which is a function of several hyperparameters and execution parameters: ...
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282 views

Scaling (Data prep) & Feature selection for the financial Data for LSTM Models

Overview I'm training an index e.g. FTSE100, where I have 8 years of past data (daily). I also have a list of its constituents. For each stock, I have the following features: ...
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1answer
748 views

Efficient integration of tick data feed with signal generation

The goal is to design the integration of processes generating trading signal doing analytics on a stream of asynchronous tick data retrieved using the native Python TWS API of Interactive Brokers. Two ...
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1answer
244 views

What are the consequences of violating Hansen-Jagannathan bounds?

Note I have added much more detail to this question I have decided to add the detail without altering the original text since a number of those of you offering assistance asked for clarification. ...
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1answer
119 views

Unsupervised learning and in out of sample

Assume we are given $N$ samples, let's say small timeseries of 1 hour resolution daily exchange rates - for the sake of argument. Each sample is a $24$ element vector $x$. Then we proceed to do ...
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1answer
331 views

Algorithmic Trading [closed]

I am a novice when it comes to algorithmic trading with strong interest in the subject matter. As I am looking around for online courses, I can only find one course called Algorithmic Trading ...
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98 views

How do I estimate opening call auction order book for equities?

The opening call auction crossing order book is partially sealed, i.e. only the specialist can see quotes. Is there a stock exchange where this data is available later to simulate the matching ...
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2answers
589 views

Why does algorithmic trading account for a significantly higher percentage of trades in the USA than in Europe or Asia?

I saw this study Why does algorithmic trading account for a significantly higher percentage of trades in the USA than in Europe or Asia? Is that because US-based exchanges offer more edge to high-...
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154 views

How can one estimate the percentage of trades that are performed using algorithmic trading?

Some studies try to estimate the percentage of trades that are performed using algorithmic trading, e.g. How can one estimate the percentage of trades that are performed using algorithmic trading?
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RegNMS, National best bid/offer and Smart Order Routing

I read Flash Boys when it first came out. If memory serves correctly it said US exchanges are required to forward received orders to another exchange if it has better prices, to achieve the best ...
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1answer
307 views

Normalise daily trading volume/value

How to normalise daily trading volume and trading value as features for RNN model of stock time series? The immediate answer could be: taking the global min/max, mean/std for each stock across the ...
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2answers
586 views

pairs trading, normalization

I am interested in implementing a simple pairs trading strategy using two correlated futures contracts. I am unsure what the best way to normalize the prices of the two instruments is. Essentially ...
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How can I extract market themes using an algorithm?

For example, "Trump tax cut" is a big theme after Trump got elected. How can I extract such themes programmatically, and how can I link the theme to a portfolio that trades on this theme? (long ...