14

Windham Capital Management is using hidden markov models for their Risk Regime Strategies. Mark Kritzman, who is also CEO, has published an article about the general outline of the strategy (with source code so you can replicate the results!): Regime Shifts: Implications for Dynamic Strategies (corrected August 2012) by M. Kritzman, S. Page, D. Turkington]...


10

First, we are few quants and academics to use the full toolkit of machine learning: stochastic algorithms, to optimal trading. Here are at least two papers: Optimal split of orders across liquidity pools: a stochastic algorithm approach, Sophie Laruelle (PMA), Charles-Albert Lehalle, Gilles Pagès (PMA) Optimal posting distance of limit orders: a stochastic ...


10

I found this solid overview of different trading algorithms by Deutsche Bank Research: Trade execution algorithms Designed to minimise the price impact of executing trades of large volumes by ‘shredding’ orders into smaller parcels and slowly releasing these into the market. Strategy implementation algorithms Designed to read real-time market data and ...


9

We cannot give you a relative bid-ask spread that would make sense. The reason for that is that it really depends on several parameters: The type of financial asset you invest in (futures, funds, index, options, ...) The period during which you're trading (I think the liquidity in markets hasn't been the same over time). If you trade intraday, it depends on ...


8

There is a paper of mine answering To this question: Dealing with the Inventory Risk. A solution to the market making problem by Olivier Guéant, Charles-Albert Lehalle, Joaquin Fernandez Tapia.


8

Ha, interesting, so many responses with "negative" expectations. There are plenty of people that have successfully gone down this road and are producing pretty nice returns, so obviously it is possible. A trader with a smaller capital has better chances of producing good ROC with very reasonable risk parameters, simply because he's would not be constrained ...


7

As a starting point to my answer, I would say that reading a book is not sufficient to start doing automated trading on your own as chrisaycock suggests in his comment. I would answer your questions in 3 different ways. First, building your "AI bot" which I would rather call a systematic algorithm not only requires programming skills, it also means having ...


7

The most commonly-known approach to this is described in Inferring trade direction from intraday data (1991) by Lee and Ready. You will find that the non-trivial part has to do with classifying trades that are reported inside the spread. I believe you will find that the Lee-Ready algorithm will outperform the naive midpoint reference approach suggested by @...


7

If I was in your position I would start to research how I can create a web server is C++ and expose calls to create a REST service. In other words, can you make your code status output to HTTP? From there, the rest should be easy. You would just need to create a GUI that can access REST services, which virtually all modern languages can. You could focus on ...


6

Concur with Thomas for most part, though I would recommend you to sign up for a trial with Dow Jones Newswire. I like the API and app that Newsware ( http://www.newsware.com/) makes available. It is not suitable for hft but I use it in order to stay informed and look up often used mnemonics. I think they have a pretty capable API and I remember they offer ...


6

The first formal model to explain this was Kyle (1985). Oversimplifying, imagine there is a group uninformed traders and an informed trader active in the market for a given security. Uninformed traders cannot make correct directional predictions. The informed trader knows --- with some uncertainty --- what the price will be at the end of a certain time ...


6

To be honest you're not likely to get a very satisfying answer to your question. Not because its a bad question, but because "regular people" can't just go hooking their home grown trading systems up to a live market. I'd like to start automating my trading strategies. First off you'll need a system that can interface with your broker. If you're not a ...


5

HFT, when they implement market-making like strategies, are a key element of a fragmented market to build "arbitrage bridges" between trading venues. There is a cost that for: we are all paying (probably around a fraction of the actual spread) to them, and the resiliency of the order books suffers because of their presence. As usual, there are positive and ...


5

I'm assuming that the algorithm is a black box. [You can't see any or all of the inner workings]. You would reverse engineer it like you would anything else: Collect evidence of events [Signals to buy/sell, quantities], and the environment that it operates in. Make theories, and then model them. For each of the theories: Make a convincing argument for ...


5

I can share my own experience working with the Deltix product suite. As a research and development platform it's very feature rich with support for every back-testing mode there is (BBO, Trade, Midprice, Bar, Level 2 Order Book) and advanced optimization modes (walk-forward, genetic, mean-variance, portfolio optimization, etc). I have built components and ...


5

It would be relatively trivial to implement a web scraper for any website you were interested in gathering news from - see Beautiful Soup for Python. This would allow you to gather and analyse news data from multiple sources in a way that may be more robust than relying on a single service. For example, you could screen scrape a certain website for the news ...


5

TLDR: Massive expansion of credit fuelled by rehypothecation, a general shift to repo, then the scale tips and everyone pays as credit collapses. Quants were there, but I don't think they can be simply blamed for all the ills of the world. There is a general disagreement about what caused what, so some of this is guesswork. I'm marking this a community wiki ...


4

Trade matching is the process of 2 investment banks electronically inputting their respective trade details into an electronic trade matching platform; it is called trade matching because both parties are equal in this relationship. Conversely, where an investment bank has executed a trade with a buy-side firm (e.g. pension fund, insurance company), part of ...


4

These are the libraries I most prominently use for C++: QuantLib Boost C++ Libraries This is not specifically a library however it is extremely helpful, the Anaconda Compiler Tools. The Armadillo C++ library for linear algebra & scientific computing. The Intel Math Kernel Library for C++ (MKL). The Ta_Lib Technical Analysis Library has an API for C/C++...


4

There is a research paper that attempts to do just that: http://www.cs.ucr.edu/~cshelton/papers/docs/orderflow_emm.pdf no personal experience implementing anything like that.


4

LMAX Exchange has a nicely written .NET API which is free and can be used to in demo environment. However, note that LMAX is mostly a FX platform with few CFDs on equities and commodities.


4

These 2 sites are relevant: - The Whole Street (research aggregation) - Oxford Capital Strategies (strategy reviews)


4

When I simulate, I can usually narrow my trades down to the minute. So I set my Open price at the HIGHEST price for the minute, and my close price to the LOWEST price for the minute. The goals is to be as conservative as possible. You don't want to go live and find that you were too optimistic in your fills. If you cannot narrow it down to smaller than a ...


4

I used https://newsapi.org/ for one of my last projects. free access to over 30,000 news sources world wide (US, Germany, India, Japan, etc.) RESTful API returning JSON excellent API documentation no throttling Example: Top Headlines Request: https://newsapi.org/v2/top-headlines?country=us&apiKey=YOUR_API_KEY Response: { status: 'ok', ...


4

Assuming the following: You consider bid/ask spread to be a transaction cost. That you're interested in passive trading since you mentioned adverse selection. As a random passive trader you simply place a bid to buy and an offer to sell at price $P$ and $P + Spread$, respectively. You do no active order management and are therefore a naive trader with ...


4

Trading through an ECN is a good idea, FXALL is probably a bad choice since they have such a small market share. Currenex and Hotspot are both better. EBS (in EUR, JPY, and CHF) and Reuters (in GBP, AUD, CAD) have the largest market shares, but they both are expensive to set up and require monthly fees regardless of how much you trade, their liquidity in ...


4

Is there anything which can be done to account for the underlyings with no listed option contracts? Classical options pricing theory relies on the idea that any option contract can be simulated with the appropriate dynamic hedging strategy. Options pricing practice indicates that this is sort-of true. So one thing you can do is synthesize the given ...


4

Look for the Overnight LIBOR or OIS rates for each currency. It's easier to find LIBOR rates by the way, but OIS are closer to being risk-free. In a nutshell, LIBOR rates contain bank related credit risk which may induce bias your analysis. Also available for the USD is the fed funds rate and the ECB refinancing rate for the EUR.


4

Most of these classifications of aggressive trades are not so relevant anymore, due to smart order routers which execute aggressive parent orders using passive child orders, as Maureen O'Hara points out in http://www2.warwick.ac.uk/fac/soc/wbs/subjects/finance/fof2014/programme/maureen_ohara.pdf I am not sure what I would do if I wanted this information, ...


3

Are you sure there is a practical use case behind this (especially step #3). Brokers don't switch sequence number back in the middle of the session. If you absolutely need to support this use Sesssion.setNextTargetMsgSeqNum() API


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