Download All About High-Frequency Trading (All About Series) by Michael Durbin PDF

By Michael Durbin

A distinctive PRIMER ON contemporary so much subtle AND debatable buying and selling TECHNIQUE

Unfair . . . outstanding . . . unlawful . . . inevitable. High-frequency buying and selling has been defined in lots of other ways, yet something is for sure--it has reworked making an investment as we all know it.

All approximately High-Frequency Trading examines the perform of deploying complex computing device algorithms to learn and interpret marketplace job, make trades, and pull in large profi ts―all inside of milliseconds. no matter what your point of making an investment services, you will achieve important perception from All approximately High-Frequency Trading's sober, target factors of:

  • The markets during which high-frequency investors function
  • How high-frequency investors profi t from mispriced securities
  • Statistical and algorithmic ideas utilized by high-frequency investors
  • Technology and methods for development a high-frequency buying and selling method
  • The ongoing debate over the benefi ts, dangers, and ever-evolving way forward for high-frequency trading

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10 may be offered by a market-maker with the remaining 100 representing an investor’s order to sell. To a prospective buyer, say, it doesn’t matter whether the seller is a market-maker or another investor. The only things that matter are price and size. It’s also conceivable that at times the entire size behind a bid or offer is presented by a market-maker. Imagine if the 500 one-dollar bids all represented market-maker interest, but only a portion of the 550 bid at 99 cents. In this case, the mere presence of market-makers improves the bid.

16,17 15 Buying at the offer is also known as taking the offer. This is sometimes known as walking the book. Some exchanges handle this differently, for example by converting the remaining order quantity to a limit order. But for our purposes, we’ll assume this mechanism. 17 This example assumes, for illustrating this point, that Acme trades only on this exchange. 99—unless they flashed the order, which is a topic we aren’t yet ready dive into, but shall. 16 All About High-Frequency Trading 22 NBBO Most securities trade not at one exchange but at several, so at any given moment, there are several active order books, each at a different exchange, for a given security.

30 The high-frequency trader is not the only trader who attempts to leverage technology to his advantage. You’ll hear the term algorithmic trader (or black-box trader) tossed about in the context of high-frequency trading, but, in most cases, this actually refers not to our high-frequency trader but to his buy-side counterpart. The algorithmic trader is more likely than not an institutional investor taking advantage of automation to serve the interests of her constituents. She traditionally leverages computational power not so much for speed of execution (although more and more she certainly is) but to determine things like optimal composition of large portfolios, when to buy and sell stocks, and how to minimize the market impact of her orders.

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