November 2019
Beginner
394 pages
10h 31m
English
Content preview from Learn Algorithmic Trading
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Place-in-line estimates
Since electronic trading exchanges have different possible models for matching algorithms, such as FIFO and pro-rata, if a trading strategy's performance depends on having a good place in the line, that is, other market participants' sizes ahead of the strategy's orders at the same price level, then it is important to accurately simulate that. In general, if the backtester is too optimistic in estimating a trading strategy's order's priority in the limit order book as compared to the rest of the market participants, that is, it assumes our order is ahead of more market participants than it actually is in live markets, this leads to false and inflated expectations of trading strategy performance.
When such trading strategies ...
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