Questions tagged [quant-trading-strategies]

Quantitative trading strategies use quantitative signals and a set of predefined systematic rules to make trading decisions. Strategies operate within parameters based on historical analysis (backtesting) and real world market studies (forward testing). Strategies may be executed manually (by a human trader) or automatically (by a computer).

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633 views

What on earth is an Alpha Model in the quantative investment process?

I am confused with the useage of the concept "Alpha Model" in quantative investment. According to Qian, Hua & Sorensen (2007), the first thing in the toolbox of quantative investment process is "...
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Papers and books related to “Forex” market microstructure

There are lots of papers and books on this topics but haven't seen much specific to forex markets nowadays. Any recommendation on recent papers or books?
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Backtesting with Simulated Historical Data?

The trading strategies that are going to backtest well are the ones that pick the winners from the past. For example, if a trading strategy simply bought apple stock it would backtest extremely well. ...
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4k views

Calculating true value of a stock given the order-book and recent trades

I'm trying to calculate the 'true value' of a stock listed on an exchange. I have access to the limit order-book (containing all bid/ask quotes) and also all trades which have taken place (which ...
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1answer
94 views

Correlation of a portfolio of trading strategies to a benchmark [closed]

I have two trading strategies, both having a correlation of 0.5 to an indicator 'i'. If I take a portfolio of these two strategies, what will be the correlation of this portfolio with the indicator 'i'...
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1answer
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Interactive Brokers - Tracking High Relative Trading Volume

I'm new to Interactive Brokers (and day trading), I am trying to setup my different charts etc. How can I have alerts/monitor for any stock that is trading at above average volume - compared to X? ...
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1answer
324 views

Using Market Gamma to Predict FX Trading Environments

I want to test a hypothesis about using gamma to predict FX movements. Suppose that market makers will seek to be delta neutral given their portfolio of FX options. At any given time, market makers ...
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1answer
434 views

Is that a good way to work with the ARMA model?

I would like to share with you what I am doing to get your point of view, and to make a better trading system in collaboration. I am working on EURUSD forex, and I am trying to find a way to place ...
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1answer
352 views

Self-Frontrunning Arbitrage

If I have a large order to fill, shouldn't I always buy a derivative in the same direction to profit from the market impact? E.g. I sell 1 million shares and so I buy a put, which will hence almost ...
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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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Meta Labeling for trading opportunities

In Advances in Financial Machine Learning, Lopez explains how we should build a primary exogenous model (binary classifier) to identify trading opportunities and a secondary meta model to filter out ...
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Realistic Modeling of Capacity in Backtesting a trading strategy

Typically the backtest of a quantitative trading strategy assumes a fixed period and fixed capital at the start to backtest a strategy. However, each strategy has a capacity (due to non-linear trading ...
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evaluating garch models

I used ugarchroll to backtest my garch model on S&P returns this is my code ...
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Dealing with missing factors

I have to deal with a factor investing strategy, with the particularity that I can't get a value for the factor for each date for each stock. Practically speaking, this is due to the fact that this ...
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Rationale behind volatility dispersion (or correlation) trading

When looking at the explanation of CBOE S&P 500 Implied Correlation Indices available here, it is written that such indices: [...] "may be used to provide trading signals for a strategy known as ...
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535 views

Can a stat arb alpha be a global macro alpha?

In academic literature, "statistical arbitrage" is opposed to (deterministic) arbitrage.[1] In deterministic arbitrage, a sure profit can be obtained from being long some securities and short others. ...
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188 views

reconstruct LOB from NASDAQ ITCH -how to handle market price order

I am trying to reconstruct the limit order book from the NASDAQ Historical TotalView -ITCH data. After I decode the raw data, I can successfully generate whole messages flow from ITCH data. However,in ...
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103 views

Trading rules from automated search

I after talking to a research fellow, researched about trading rules from automated search. I found in the book Finding Alphas by Tulchinsky a general chapter, ...
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2answers
671 views

Arbitrage and dominant strategies

If there is no arbitrage there is no dominant trading strategy, but there may be arbitrage opportunities even if there are no dominant trading strategies. Could you explain this statement and bring ...
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2k views

How to combine trading signals to achieve higher capital efficiency?

I trade use a completely automated approach where all signals are generated by proprietary trading strategies. However, recently I encountered an challenging problem: Imagine we have 3 Strategies ...
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How to trade risk-adjusted returns?

Why does dividing daily returns by daily range eliminates fat tails and results in an (almost) gaussian distribution? And how could that distribution be exploited to enter trades?
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1answer
353 views

Why do trading strategies lose effectiveness over time?

I don't do any financial trading, and this question came up to me as I was browsing through some questions on this SE. A general sentiment I felt after reading though several questions on this SE, is ...
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1answer
392 views

What are the “sniffing” or “stalking” algorithms?

I was looking for all the sorts of trading algorithms used in stock market and I came across the so-called "sniffing" algorithms. However, the explanations of this concept I found are very ...
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4answers
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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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3answers
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Is it possible to make profit by reversing client trades for a market maker?

If a market maker is making profit in a considerably enough period, then does it mean that the clients that bought/sold from/to the market maker lost money? If so, is it possible that market makers ...
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How does duplicate data affect backtesting?

Before developing a trading strategy, one should clean and preprocess his data set. It is very common that a data set contains huge number of duplicates. Question: How does duplicate data affect ...
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281 views

Formerly profitable algorithmic trading strategies?

Since algorithmic trading strategies often stop being profitable after a while, I wonder if any such formerly profitable strategies have been made public, and if so, where can I find them?
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1k views

How could one trade volatility skew if you think it's too flat or steep?

We all know that you can trade on a forecast of volatility by dynamically hedging, but I'm wondering if there's a similar technique where in you can trade the skew specifically? Let's say you travel ...
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1answer
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Stochastic Calculus in Quantitative analysis

I am an aspiring quant that would like to get a head start learning stochastic calculus, which books FROM EXPERIENCE are the most reader friendly?
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441 views

Reference on Futures basis trading strategy

I have heard that it is possible to trade on the futures basis. In my understanding, the futures basis is essentially the difference between the futures price and the underlying asset (also referred ...
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1answer
580 views

Method to combine trading signals to achieve higher sharpe

There are a few thread with the question of methods to combine different trading signals/strategies. But is there any method that can ensure that by combining two signals, we can achieve a better ...
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1answer
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CAPM and factor modeling: Machine learning

Excuse my ignorance with this I am still trying to wrap my head around the interpretation of the Fama French 1992 factor paper. I come from a computer science background but I am interested in ...
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1k views

Didier Sornette's Strategy to Exploit Return Correlations

In his book, "Why Stock Markets Crash", Didier Sornette discusses a trading strategy that exploits return correlations. Consider a return $r$ that occurred at time $t$ and a return $r'$ that ...
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1answer
651 views

Example of delta one products

Not sure if this is the right place to ask such question. How close to 1 should the delta be in order for the product to be classified as delta one. 2.What examples of delta one products are there?
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93 views

What instruments help me receive a premium?

Apart from selling options , what other instruments can I trade(sell) to collect a premium ? The main problem that I face is as follows : I am buying a Call option which I would like to fund by ...
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2answers
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Index arbitrage with Options when not all underlyings have options listed?

One arbitrage strategy involves looking at the price of the Index Futures price compared with the prices of the options contracts for the underlyings. My question is, can this arbitrage strategy ...
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1answer
142 views

Continuous Percentage Profit and Loss calculation

I need to calculate a profit and loss for an equity timeseries. The position size (column D in the below table) is not binary (not moving from zero position to a position and then back to zero ...
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1answer
316 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
139 views

Is there anything like Quantopian in R?

Quantopian is an incredible tool for the quant community, but it is Python based only. Just wondering if is there anything like Quantopian in R that you reccommend?
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1answer
188 views

Pairs Trading situation with spread changes

I'm setting up pairs trades by summing the distances squared (SSD). After determining the best pairs, I have to track the spread between the normalized prices. Am I noticing something that is ...
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2answers
217 views

Applying my Machine Learning class (possibly to small markets) [closed]

I've finished a university course in statistical machine learning that covered topics such as regression, classification, neural networks, SVM, PCA etc. The class was quite tough and rigorous (we had ...
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1answer
318 views

Reference request: Quantitative Trading Strategies [closed]

I intend to thoroughly prepare for an internship that I will start in a couple of months, and therefore wanted to clarify what topics I need to study and some recommended references for them. The ...
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1answer
269 views

Is there any application of power law to predict large returns?

Power law basically states that after a certain threshold, probability distribution $p(x)\sim c\,x^{a}$ where $x > x_{min}$, which is often the case for financial time series. It is also generally ...
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1answer
140 views

Relationshiop between central bank official currency rates and spot forex

Central banks publish official figures for domestic interest rates, as well as spot currency rates for a few select countries (largest trading partners). To prevent arbitrage, I "expect" that in the ...
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1answer
203 views

How to account for correlation between strategies when they are added linearly?

There are n strategies which are going to be combined linearly. Using a pre-exisiting model I get a set of n weights which will be used to combine the strategies. But the model does not take ...
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1answer
134 views

Why are quadratic variation and rough paths so important in quantitative finance?

I am new to quant finance - come from a mathematics background. I am starting stochastic calculus and have been particularly interested in some papers pathwise integration and rough calculus in ...
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1answer
212 views

Bootstrap Method for Assessing Pairs Trading Performance

After reading this paper I tried to replicate it. I almost done, but I am stuck on the section 3.6 where the author constructs a random pair (how he constructs this?) for Assessing Pairs Trading ...
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2answers
1k views

Why do we need event-driven backtesters?

I am reading this article at quantstart regarding event-driven backtesters. It seems to me that the main advantage of using an event-driven backtesters is that it avoids look-ahead bias. Usually I ...
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1answer
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Question about inverse leverage etfs

https://www.math.nyu.edu/faculty/avellane/LETFSlides.pdf This shows that when that the inverse fund grows assuming zero volatility at $e^{r(1-b)}$ where $b$ is the leverage used and $r$ is the ...
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1answer
433 views

Interpretation of Open Interest for Options

Please define Option Open Interest, its interpretation, and why it matters? From my understanding, option open interest describes the net of long-short outstanding call or put options. But I do not ...

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