High-Frequency Trading

High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems (Wiley Trading)

A hands-on guide to the fast and ever-changing world of high-frequency, algorithmic trading

Financial markets are undergoing rapid innovation due to the continuing proliferation of computer power and algorithms. These developments have created a new investment discipline called high-frequency trading.

This book covers all aspects of high-frequency trading, from the business case and formulation of ideas through the development of trading systems to application of capital and subsequent performance evaluation. It also includes numerous quantitative trading strategies, with market microstructure, event arbitrage, and deviations arbitrage discussed in great detail.

• Contains the tools and techniques needed for building a high-frequency trading system
• Details the post-trade analysis process, including key performance benchmarks and trade quality evaluation
• Written by well-known industry professional Irene Aldridge

Interest in high-frequency trading has exploded over the past year. This book has what you need to gain a better understanding of how it works and what it takes to apply this approach to your trading endeavors.

The Evolution of Trading

Amazon-exclusive content from author Irene Aldridge

It seems just yesterday traders were chit-chatting with their executing brokers or customers over the telephone, while processing orders. Now, the days of turtle trading are over. Fueled by the plummeting costs of computers, financial sector has managed to dramatically increase profitability by entrusting computers with data analysis, trade signal generation and trade execution. Computers, capable of processing information much faster than humans, began trading rapidly, opening and closing positions to capture minute oscillations in prices; a new discipline, dubbed high-frequency trading, was born.

Since its inception, in the early 1980s, high-frequency trading has evolved as computing capacity has grown. Just over the past 5 years, the daily volume of trades executed by computers has doubled. Alongside these developments, new ways to adapt academic research and to computerize trading activity have been developed.

While “geeks” often claim high-frequency trading as their domain, anyone with the basic knowledge of computer programming can also participate in high-frequency trading. Minimal investment is required. A computer set up to play online video games is in most cases fast and powerful enough to run a high-frequency trading system. The barriers for entry into the field of trading have never been lower.

As a result, the dominant players in the field shift frequently, the markets change and once-profitable strategies become obsolete. Such is the reality of today’s trading landscape. It is also a landscape of opportunity for anyone willing to apply their intellect to instruct computers to solve real-time dependencies in layers of market data. My book, High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems shows this opportunity through aggregating the knowledge required to profitably function in today’s trading environments.

Table of Contents

Chapter 1: Introduction
Chapter 2: Evolution of High-Frequency Trading
Chapter 3: Overview of the Business of High-Frequency Trading
Chapter 4: Financial Markets Suitable for High-Frequency Trading
Chapter 5: Evaluating Performance of High-Frequency Strategies
Chapter 6: Orders, Traders, and Their Applicability to High-Frequency Trading
Chapter 7: Market Inefficiency and Profit Opportunities at Different Frequencies
Chapter 8: Searching for High-Frequency Trading Opportunities
Chapter 9: Working with Tick Data
Chapter 10: Trading on Market Microstructure
Chapter 11: Trading on Market Microstructure
Chapter 12: Event Arbitrage
Chapter 13: Statistical Arbitrage in High-Frequency Settings
Chapter 14: Creating and Managing Portfolios of High-Frequency Strategies
Chapter 15: Back-Testing Trading Models
Chapter 16: Implementing High-Frequency Trading Systems
Chapter 17: Risk Management
Chapter 18: Executing and Monitoring High-Frequency Trading
Chapter 19: Post-Trade Profitability Analysis