Questions tagged [trading]

Attempting to profit from short-term fluctuations in a security's price as opposed to investing in the security for use or income.

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FX Options price vs implied vol

From the screenshot below, what is the difference between the option price by strike in the table versus the implied volatilities by delta in the chart at the bottom? https://www.investing.com/...
Student's user avatar
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6 votes
4 answers
1k views

How can we estimate new stock price after a large purchase?

Suppose someone buys $4bn of a particular stock over the period of a few weeks. Depending on how much that stock is being traded, you would expect that the price goes up in a visible way compared to ...
doublefelix's user avatar
27 votes
5 answers
10k views

Volatility pumping in practice

The fascinating thing about volatility pumping (or optimal growth portfolio, see e.g. here) is that here volatility is not the same as risk, rather it represents opportunity. Additionally it is a ...
vonjd's user avatar
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4 votes
1 answer
707 views

Inflation effect on FX rates

With UK's inflation surging to 3.2% as per the published figures today reported by the FT, it is interesting to ponder the effect of rising inflation on FX rates. The article linked above points out ...
Jan Stuller's user avatar
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28 votes
8 answers
5k views

How to design a custom equity backtester? [closed]

I was thinking about writing my own backtester and I realize I have to make some assumptions. So I was hoping I could post what I am planning on doing and hopefully some of you can give me some ideas ...
user667's user avatar
  • 381
18 votes
3 answers
6k views

How do I find the most diversified portfolio, or least correlated subset, of stocks?

I have a trading system that chooses top 10 stocks in Nasdaq 100 ranked on relative strength and some other factors. However, I'd like to take positions in only 5 of these 10 stocks based on how ...
user1232's user avatar
  • 181
4 votes
2 answers
2k views

Detect pattern from OHLC data in Python

I'm trying to create a script that, from standard OHLC data, finds patterns. The specific pattern i'm looking for right now is sideways movement after a move up, here is an example: So basically my ...
Jack022's user avatar
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2 votes
4 answers
589 views

FX official rates

How are "official" FX rates calculated? Are these given by an average across all big dealers or brokerage systems (eg EBS, Reuters)?
Student's user avatar
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28 votes
6 answers
35k views

Applications of Fourier theory in trading

What are fashionable applications of Fourier analysis in trading? I have heard vague ideas of applications in High Frequency Trading but can somebody provide an example, maybe a reference? Just for ...
Richi Wa's user avatar
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27 votes
4 answers
3k views

How are risk management practices applied to ML/AI-based automated trading systems

A potential issue with automated trading systems, that are based on Machine Learning (ML) and/or Artificial Intelligence (AI), is the difficulty of assessing the risk of a trade. An ML/AI algorithm ...
Kiril's user avatar
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15 votes
3 answers
8k views

How to simulate slippage

I'm backtesting a trading strategy, using free OHLC data from yahoo or google. I'm simulating friction by lopping a flat percentage (say 0.5%) off my returns for each day that I make a trade. Whats ...
Zach's user avatar
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13 votes
8 answers
20k views

Does anyone know of an equivalent to trader test? [duplicate]

I've been looking at forums that provide links to prep for trading interviews and TraderTest.org always pops up however, the website is down. Does anyone know what happened to the website or what are ...
user130306's user avatar
11 votes
1 answer
1k views

A generic limit order book: What are the most important queries it should be able to answer?

Assume a class LimitOrderBook which represents a limit order book in a trading system. To be able to represent the limit order book a data handler reads a feed ...
knorv's user avatar
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10 votes
2 answers
3k views

How long do algorithmic trading strategies typically remain profitable?

As I understand it, an algorithmic trading strategy could lose profitability, if, for example: it's rediscovered by others employee turnover leaks the strategy to others market conditions change ...
MWB's user avatar
  • 301
10 votes
2 answers
5k views

Trading interview gambling question

You're invited to a one-on-one coin-flip gambling game. Your opponent has 1 million USD on hand (the max you can bet is 1 million USD). The payouts for flipping heads and tails are as follows: Tails: ...
Jojo's user avatar
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9 votes
2 answers
20k views

How to use PCA for trading

Can anyone give me a few pointers of how to approach using PCA for trading? In particular, it seems to me, PCA is useful for selecting a subset of a portfolio of stocks(or other) rather than trading ...
ManInMoon's user avatar
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9 votes
2 answers
3k views

Which algorithm should I look into to kick off my research in algorithmic trading? [closed]

I have recently undertaken a research into automated algorithmic trading algorithms. The aim of the research is to focus on studying algorithmic trading and trying to improve a basic implementation ...
k9ty's user avatar
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6 votes
2 answers
3k views

What is gamma to do with realized volatility?

I keep hearing that gamma is a bet on realized volatility. That is, if we are long gamma then we need higher realized volatility to come in the future in order to make a profit. from other source: If ...
dopller's user avatar
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5 votes
2 answers
8k views

GJR-GARCH Model In R

Any idea how to estimate GJR-GARCH models in R? Is there any particular library like fGarch that supports such models?
Add's user avatar
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5 votes
0 answers
1k views

Which CEP platform is most popular for trading systems? [closed]

I heard that trading firms employ CEP platforms such as StreamBase, Marketcetera, JBoss Drools, and etc., to implement trading systems. I wonder which one is most popular and the recent trend of ...
Paul's user avatar
  • 59
4 votes
1 answer
992 views

How trading in currency pair works, underlying techniques and mechanisms

I am somewhat experienced in Forex trading, but I have a question which has bothered me for quite some time. If we for instance go back in time four months, to before the beginning of value loss the ...
mjs's user avatar
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2 votes
2 answers
280 views

What is the best way to interpret changes in Treasury yields?

My question is quick and simple. However, I would like to use this answer to further my understanding of bonds and yields. If the YTM on a 10yr Note yesterday was 1.00% and the YTM on the same 10yr ...
Andrew Warner's user avatar
2 votes
1 answer
999 views

Quantlib Black Model for Commodity Options (Interest Rate Options) is extremely light on gamma and price vs BBG, is model incorrect?

I am using the QuantLib developers example to try and price a TY option. The Delta is pretty close but the price and gamma are way off (almost by a factor of 2). Am I using the model wrong or is the ...
Danny's user avatar
  • 23
2 votes
2 answers
124 views

Parameters used by brokers when executing large institutional orders?

When an institutional trader wants to enter or exit a large position, the broker has to process the trade in smaller chunks to keep market impact at a minimum. So the broker would say that they can ...
Kagaratsch's user avatar
1 vote
1 answer
823 views

Arbitrage between markets

I'm trying to understand how arbitrage works, but I'm having some difficulties based on some restrictions: I have markets A, B and C. The currencies that are traded are X <-> Y, and X <-> Z. ...
Kiril's user avatar
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1 vote
1 answer
393 views

Interest rate swap Profit and loss attribution

I am wondering how the IRS daily PnL will normally be attributed from trader's/market risk perspective. Will it be broken down into three parts daily carry (Daily interest accrual), daily roll-down (...
kit's user avatar
  • 11
1 vote
1 answer
214 views

How to calculate the daily rate of return for an actively traded account

I have a spot currency exchange account where the base currency is USD and where I can deposit and/or withdraw money from the account in any currency at any point in time. I can also exchange any ...
finstats's user avatar
  • 403
1 vote
0 answers
120 views

Physical trading spot transaction analysis-Quantified

ref to my previous question here: Physical commodity trading quantitative risk return model I am currently new to commodities and physical trading. I have currently narrowed down my area of analysis ...
El_1988's user avatar
  • 193
0 votes
1 answer
132 views

How am I buying at the bid?

I've done some active trading in my personal account at Fidelity. With surprising frequency when I enter market orders I am filled at the bid for buys and at the ask for sells! How and why does this ...
feetwet's user avatar
  • 233
0 votes
1 answer
579 views

The most appropriate volatility model

Which would be the most appropriate models to find volatility trading opportunities (i.e. plot a theoretical volatility smile I can rely on) for the following instruments: Options on equity Options ...
Alex's user avatar
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