December 2009
Intermediate to advanced
352 pages
8h 47m
English
book
High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems
by Irene Aldridge
Content preview from High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading SystemsBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
Chapter 16. Implementing High-Frequency Trading Systems
Once high-frequency trading models have been identified, the models are back-tested to ensure their viability. The back-testing software should be a "paper"-based prototype of the eventual live system. The same code should be used in both, and the back-testing engine should run on tick-by-tick data to reenact past market conditions. The main functionality code from the back-testing modules should then be reused in the live system.
To ensure statistically significant inferences, the model "training" period T should be sufficiently large; according to the central limit theorem (CLT), 30 observations is the bare minimum for any statistical significance, and 200 observations is considered a reasonable number. Given strong seasonality in intra-day data (recurrent price and volatility changes at specific times throughout the day), benchmark high-frequency models are back-tested on several years of tick-by-tick data.
The main difference between the live trading model and the back-test model should be the origin of the quote data; the back-test system includes a historical quote-streaming module that reads historical tick data from archives and feeds it sequentially to the module that has the main functionality. In the live trading system, a different quote module receives real-time tick data originating at the broker-dealers.
Except for differences in receiving quotes, both live and back-test systems should be identical; they can be ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Read now
Unlock full access
More than 5,000 organizations count on O’Reilly
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.Addison B.
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.Amir M.
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.