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Searching for High-Frequency Trading Opportunities

Searching for High-Frequency Trading Opportunities

Irene Aldridge

ISBN: 978-1-118-00630-6

Sep 2011

21 pages

Select type: E-Book



Praise for

High-Frequency Trading

"A well thought out, practical guide covering all aspects of high-frequency trading and of systematic trading in general. I recommend this book highly."
—Igor Tulchinsky, CEO, WorldQuant, LLC

"For traditional fundamental and technical analysts, Irene Aldridge's book has the effect a first read of quantum physics would have had on traditional Newtonian physicists: eye-opening, challenging, and enlightening."
—Neal M. Epstein, CFA, Managing Director, Research & Product Management, Proctor Investment Managers LLC

Interest in high-frequency trading continues to grow, yet little has been published to help investors understand and implement high-frequency trading systems—until now. This book has everything you need to gain a firm grip on how high-frequency trading works and what it takes to apply this approach to your trading endeavors.

Written by industry expert Irene Aldridge, High-Frequency Trading offers innovative insights into this dynamic discipline. Covering all aspects of high-frequency trading—from the formulation of ideas and the development of trading systems to application of capital and subsequent performance evaluation—this reliable resource will put you in a better position to excel in today's turbulent markets.


Chapter 1 Introduction.

Chapter 2 Evolution of High-Frequency Trading.

Financial Markets And Technological Innovation.

Evolution Of Trading Methodology.

Chapter 3 Overview of the Business of High-Frequency Trading.

Comparison With Traditional Approaches to Trading.

Market Participants.

Operating Model.


Capitalizing a High-Frequency Trading Business.


Chapter 4 Financial Markets Suitable for High-Frequency Trading.

Financial Markets and Their Suitability for High-Frequency Trading.


Chapter 5 Evaluating Performance of High-Frequency Strategies.

Basic Return Characteristics.

Comparative Ratios.

Performance Attribution.

Other Considerations in Strategy Evaluation.


Chapter 6: Orders, Traders and their Applicability to High-Frequency Trading.

Order Types.

Order Distributions.


Chapter 7: Market Inefficiency and Profit Opportunities at Different Frequencies.

Predictability of Price Moves at High Frequencies.


Chapter: 8: Searching for High-Frequency Trading Opportunities.

Statistical Properties of Returns.

Linear Econometric Models.

Volatility Modeling.

Nonlinear Models.


Chapter 9: Working with Tick Data.

Properties of Tick Data.

Quantity and Quality of Tick Data.

Bid-Ask Spreads.

Bid-Ask Bounce.

Modeling Arrivals of Tick Data.

Applying Traditional Econometric Techniques to Tick Data.


Chapter 10: Trading on Market Microstructure Inventory Models.

Overview of Inventory Trading Strategies.

Orders, Traders and Liquidity.

Profitable Market Making.

Directional Liquidity Provision.


Chapter 11: Trading on Market Microstructure Information Models.

Measures of Asymmetric Information.

Information-Based Trading Models.


Chapter 12: Event Arbitrage.

Developing Event Arbitrage Trading Strategies.

What Constitutes an Event?

Forecasting Methodologies.

Tradeable News.

Application of Event Arbitrage.


Chapter 13: Statistical Arbitrage in High Frequency Settings.

Mathematical Foundations.

Practical Applications of Statistical Arbitrage.


Chapter 14: Creating and Managing Portfolios of High-Frequency Strategies.

Analytical Foundations of Portfolio Optimization.

Effective Portfolio Management Practices.


Chapter 15: Back-Testing Trading Models.

Evaluating Point Forecasts.

Evaluating Directional Forecasts.


Chapter 16: Implementing High-Frequency Trading Systems.

Model Development Lifecycle.

System Implementation.

Testing Trading Systems.


Chapter 17: Risk Management.

Determining Risk Management Goals.

Measuring Risk.

Managing Risk.


Chapter 18: Executing and Monitoring High-Frequency Trading.

Executing High-Frequency Trading Systems.

Monitoring High-Frequency Execution.


Chapter 19: Post-Trade Profitability Analysis.

Post-Trade Cost Analysis.

Post-Trade Performance Analysis.


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