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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best method for calculating dynamic hedge ratio between pairs?
I am relatively new to quantitative finance, and I would like to clarify something regarding the hedge ratio used in calculating the spread between the pair.
using python
Say I have time series <...
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3 views
Non-binary Strategy evaluation by comparing to a perfect baseline
When building a strategy, how do you evaluate if it is 'good enough'? Some may say 'Well if it has positive return and low drawdown it should be a good indication', and others will add more 'things it ...
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21 views
Correct labelling for trading strategies
In trying to build a ML powered trading strategy, one of the most important tasks is to correctly label the data so that the results of whatever classification algo you are using will be properly ...
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12 views
how to calculate/retrieve the number of sell orders (and buys orders as well) to detect iceberg orders
As a manual trader, i could identify the iceberg orders because my interface provided me in real time the number of buys and the number of sells at best ask and best bid.
For instance, when the ...
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15 views
How to calculate technical indicator using tick data cross the night?
The tick data shortly before the close in yesterday have different statistics and charasterices compared the tick data shortly after the open in today. Then, how I calculate the indicators using the ...
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62 views
Market Making constant volatility assumption
I have read a few papers on market making and all(nearly) assume that the stock follows a brownian motion with no drift and constant volatility.These assumptions seems un-intuitive to me because of ...
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1answer
73 views
What is the formula to calculate Implied Volatility Percentile [closed]
I googled and I am unable to find any formular . Can some one give me the formula to calculate IVP , based on sets of IV's given.
Thanks.
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1answer
45 views
Is there something for API trading in E-mini S&P 500 Futures or other futures
I found a lot of results about data feeds, and I found some platforms (like Alpaca) for API trading. But none seem to have the possibility to sell/buy futures via a REST API.
So my question is: Who ...
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1answer
59 views
How can I model the way that average Joe trades in FX markets?
I want to develop a trading bot that trades like a non-professional trader in FX markets.
I wonder if it is possible to think that an average trader trades randomly regardless of the market conditions?...
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1answer
73 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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42 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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2answers
131 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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48 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
55 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
203 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
121 views
Implied volatility is returning infinity
I am trying to calculate implied volatility using javascript , I have following code
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1answer
137 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
445 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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1answer
35 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
35 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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0answers
64 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
113 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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0answers
69 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
82 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
269 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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0answers
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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123 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
202 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 ...
2
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1answer
108 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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57 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
590 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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0answers
71 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
116 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
120 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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0answers
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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1answer
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
88 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
54 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
82 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
292 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 ...
2
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0answers
75 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 ...
2
votes
2answers
189 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
57 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
111 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 ...
3
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1answer
251 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
160 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
173 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 ...
