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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157 views

Accurate model but execution in backtesting is losing money

I have a binary classification model that predicts BUY (1) and SELL (-1) with an out of sample F1 score of 71% (precision is 65% and recall is 80%). The model's output is a probability of a BUY label ...
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2answers
211 views

Deep Reinforcement Learning in Quant Finance?

I've been struggling to find engaging papers on the application of deep reinforcement learning in quantitative risk analysis, portfolio management, algorithmic trading and/or options pricing. What are ...
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6k 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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189 views

Implied volatility is returning infinity

I am trying to calculate implied volatility using javascript , I have following code ...
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16 views

How to deal with outliers when normalizing price related input in algorithmic trading

I am training a CNN model for trading using indicator and MA lines to compose a 2D array as input. I want to normalize MA data(ema, sma...) into range between -1 and 1, I have tried several techniques ...
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1answer
71 views

What should the look-back period be when calculating Cointegration?

So I am confused as to what the look-back period should be when calculating Cointegration. By this I mean when running for example a Johansen or ADF test, should my look-back period be 6 months?...
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3answers
448 views

Can one successfully daytrade 0dte options based on RSI?

I've been doing that manually for 2 months successfully (40% ROI) with SPX 0-1 DTE (Days To Expiration) options, both puts and calls. I might be just lucky so I purchased some data to do backtesting ...
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1answer
26 views

Why does historical equity ticks from Dukascopy.com not contain trade ticks?

I've found that ticks for equities (for example for companies from US market like Amazon or Apple) someone could name as "best bid/ask offer" (or Level 1 type of tick data) and them clearly ...
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1answer
139 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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2answers
979 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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29 views

How to understand the results of the Johansen test?

So I now there are numerous pages on the johansen test, and what the results mean. Though I am confused as to what it is doing exactly. So my understanding is that it will find the spread of 2 ...
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476 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
68 views

Should I calculate a spread using stock prices or the ratio?

So I am creating a trading algorithm thats uses cointegration, for a pairs trading strategy. Imagine there is stock A for 100 dollars and stock B for 25 dollars. My questions is when caulcating the ...
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122 views

The quality of an trading algorithm

Good day. I am currently writing a term paper on the creation of trading algorithms in the foreign exchange market (by an algorithm I mean the one that follows the alpha model, for example, signals ...
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1answer
105 views

Just wondering any algo strategy popular for vanilla bond trading?

I got extensive experience on algo trading for cash equity, FX, so just wondering any algo strategy popular for vanilla bond trading?
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913 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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312 views

Tactical Investment Algorithms

I am reading paper "Tactical Investment Algorithms" (link) (NOTE: you can download the paper without registration, just press "Download" and then "Download without ...
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101 views

Machine learning algorithms that generate trading models (literature)?

Is there any academic literature on machine learning algorithms that are able to generate functioning trading models? Would this even be feasible at all, now or in the future? Could you point me to ...
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40 views

Cumulative returns from ROI of individual trades

I've a series of ROIs: $R(n) = [r_1, r_2, ... r_n]$ generated from taking $n$ trades. Each ROI value is in percent $[0, 1]$. How do I generate cumulative return $C(n)$ from this data? My understanding ...
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42 views

Managing fund of bot users

I'm algotrading since 2018 and been profitable (not much, but consistent) since then. This year I thinking in make a business around this bot. My only doubt is how do I manage the fund of all users? ...
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221 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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39 views

Computing Sharpe ratio correctly when adding more funds

I've a very basic question: Assume, as time $t_0$, I started a algorithmic trading strategy with initial capital $X_0$. My strategy on subsequent $N$ time frames generated returns $r(t_1), r(t_2),..r(...
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147 views

What kind of option would best be suited for a price based algorithm?

So say I wanted to make money off of a simple RSI-MACD algorithm on SPY (ofc this may not necessarily make money, but let's say it does). I'd like to leverage my returns using call and put options, ...
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1answer
223 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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2answers
113 views

What is the disadvantage using the edge ratio?

I want to evaluate and optimize an algorithmic trading system. For this I want to follow a step by step approach - first looking at the entry, later at other aspects of it (money management, position ...
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4answers
158 views

Which Nikkei225 futures contract to take?

I have a working (swing) trading strategy based on equity index futures in place. I enter and exit by giving market orders. The strategy generates roughly 40 trades per instrument per year. I want to ...
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149 views

Is it possible to match talib's RSI results down to machine precision using just python?

I want to match talib's RSI with just python down to machine precision and I'm struggling. Out of curiosity I also tried a bunch of libraries like tulipy and pandas_ta and the gaps are similar. ...
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4answers
2k views

Is this how stock trading works?

I was told to move this question here from Money Stack Exchange, where some people have already provided some feedback. This is a very basic question about the Stock Exchange, and I was looking for ...
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7answers
973 views

Learning and applying Quantitative Finance successfully as an individual instead of a team

In the past few months, I became really interested in using machine learning techniques in the realm of quantitative finance and trading. I made a few rudimentary models and I immediately realized how ...
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0answers
84 views

Forex trailing stops - better alternatives?

I've been pursuing the holy grail of trading, short term FX trading, using machine learning. I've experimented with a ton of strategies but mainly those revolving around holding each trade for a ...
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1answer
68 views

Extract time and sales from the level 2

I need data to test some mathematical models. So far I have the level 2 over 120 layers, but I can't pay for the time and sales. Is it possible to extract the time and sales from the level 2? By ...
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3answers
429 views

Basics of trading strategy development

I am Computer engineer and I know programming in python, go-lang, C++, I am interested in trading, I know how to make system to get data, send orders, back-test, fault-tolerance system, etc I have ...
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144 views

How do you formulate trading ideas and strategies?

I have access to some tick data and Bloomberg data. Outside of data mining and hoping to find an economic rationale after the fact, what do you usually do to generate ideas before you look at the ...
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1answer
205 views

How to propertly change time horizon in Avellaneda-Stoikov model?

I'm working in the Avellaneda-Stoikov implementation using Python. My implementation reproduces the authors' results, but I don't know how to properly adapt the algorithm in order to consider a larger ...
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1answer
46 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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2answers
868 views

How to understand micro-price (aka, weighted mid-price)?

The definition of micro-price is S = Pa * Vb / (Va + Vb) + Pb * Va / (Va + Vb) where Pa is the ask price, ...
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0answers
49 views

The discontinuity when applying the combinatorial purged cross-validation

In Marcos Lopez de Prado's book, Advances in financial machine learning, he recommends using the combinatorial purged cross-validation(CPCV) for backtesting. His motivation is sensible. Through the ...
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2answers
81 views

How to calculate 5 EMA

I am trying to understand the basics of finance indicators. I have made 15 minute ohlc candles for the past 50 days. Now if I try to calculate 5EMA, my doubt is ...
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30 views

Ratio of mean profit to its standard deviation in algorithmic trading system

I am trying to build a trend following system. Currently, I am backtesting it on historical data. After several thousand operations, the mean profit is positive after commissions, but its standard ...
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1answer
157 views

How to manage theta, gamma, vega, and delta risk in options market making simulation

I'm just starting to learn how to trade options and as part of an algorithmic options market making simulation I have risk limits for the greeks (gamma, vega, delta, and theta). There are 9 strikes ...
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60 views

API for Real-time and historical Stocks Tick Data

I am looking for a reliable API (e.g. Bloomberg, but available for individuals) where I can get stock tick data up to the minute, both historical and real-time. Obviously I am willing to pay for the ...
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2answers
88 views

Tips on building an automated trading system in python [closed]

I have an trading API that allows me to send/cancel/update orders. I have marketdata that I can use through another API that gives me orderbook data. Now let's say I want to build a simple arbitrage ...
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1answer
89 views

Do Institutions (large trading firms) use market orders?

It is well known that Institutional traders (Large trading firms, market makers) most of the time use LIMIT orders or Hidden limit orders. My question is, do they ever use market orders in their ...
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1answer
204 views

Broker that allows algo trading, no pdt rule and a low minimum deposit

I was looking for a broker that offers these things: ...
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4answers
2k views

Algorithmic Trading: Python vs SQL

I am new to algo trading. But I have bit of coding experience in SQL. Now I am planning to develop a Algorithmic Trading system. In here I am storing all the historical data in Database (PostgreSQL DB)...
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52 views

What benefits do using log returns for model training provide?

I came across a paper that uses Support Vector Machines to classify a buy/sell/hold decision each hour at the $\pm$0.5% threshold. The paper can bee seen here. The ...
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34 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 to the tick data shortly after the open in today. Then, how I calculate the indicators using ...
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0answers
81 views

How to monetize ability to predict small stock movements smaller than spread?

For a relatively small subset of stock symbols I have been able to build a model that is able to 20-100 times per day consistently predict whether a stock is going up within the next 2 minutes, being ...
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2answers
93 views

Why doesn't algorithmic trading require humans to digest new data?

Can't new data be divided into those that ought be digested by humans, and those that don't? If so, why aren't humans digesting the data that ought be digested by humans? Sell-offs could be down to ...
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6k views

Is it really possible to create a robust algorithmic trading strategy for intraday trading?

I'm an engineer doing academic research for my master thesis in the area of quantitative finance, basically the purpose is to study the possibility to create an intraday-trading algorithm. I've tried ...