Algorithmic Trading

TSGannGalt · Aug 21, 2005

LOL...

If it can be realistically thought of, it's been done.

"Rich get richer"

mail2smitty · Aug 21, 2005

Quote from cosine:

I'm also trying to find this paper:

http://ideas.repec.org/p/fth/louvco/9789.html

It seems to investigate something similar to what you just mentionned. I've seen a presentation made by the author on the subject, and it seemed quite promising... [/B]

cosine:

http://www.core.ucl.ac.be/services/COREdp97.html

scroll down to article 9789, pick the "version.ps' at the end of the article description - is the full 22 pages in postscript format.

smitty

aPismoClam · Aug 21, 2005

tlansaction costs, glasshoppah.

cosine · Aug 21, 2005

Thanks a lot dude!

Quote from mail2smitty:

cosine:

http://www.core.ucl.ac.be/services/COREdp97.html

scroll down to article 9789, pick the "version.ps' at the end of the article description - is the full 22 pages in postscript format.

smitty

prt_systems · Aug 22, 2005

Quote from cosine:

....

The point is to trade on noise, and to get out of the market early when information shocks hit the market and are assimilated into prices. ....

Engle is a nobel prize laureate (unlike grob109). I think we can trust his results.

Institutionals already use this. Maybe so should you, before thinking of beating the market...../B]

One of the few useful posts I have seen here .....
and good advice for anyone constructing a trading strategy or ATS.

nononsense · Aug 22, 2005

Quote from cosine:

...

Engle is a nobel prize laureate (unlike grob109). I think we can trust his results.
...

Your friend, cosine

Dear friend cosine,

You appear to be a firm believer in Santa Claus kind of fables. What does a nobel prize laureate have to do with making money in markets?

I'm not a fan of Jack's, but Jack could very well be more clever at it than your nobel little Jack in the Box.

You remember how those scandinavian know-alls once bestowed a nobel price on market wizzards Black & Schol? They seem to have gone out of fashion in the meantime. If you look around a bit, lots of doubt about its money making value.

Your friend, nononsense

cosine · Aug 22, 2005

Dear friend nononsense,

Would I be a firm believer in Santa Claus, I would still be trying to decipher Jack's sophisticated charlatanism.

I have never refered to Engle's capacity to make money in the markets. However, allow me to be more confident in his theory and maths than in Jack's.

As for black scholes, it's "money making value", as you refer to it, was sure not questionned when nobody had an actual idea about dynamic hedging. Black scholes has had its time, and has made a few millionaires in the process, dont worry.

In the markets, everything "goes out of fashion in the meantime". Including all your TA books and Buffet's overused investment philosophy.

Have a good day,

cosine

Quote from nononsense:

Dear friend cosine,

You appear to be a firm believer in Santa Claus kind of fables. What does a nobel prize laureate have to do with making money in markets?

I'm not a fan of Jack's, but Jack could very well be more clever at it than your nobel little Jack in the Box.

You remember how those scandinavian know-alls once bestowed a nobel price on market wizzards Black & Schol? They seem to have gone out of fashion in the meantime. If you look around a bit, lots of doubt about its money making value.

Your friend, nononsense

stephencrowley · Aug 25, 2005

In case anyone was wondering. The Econometrics of Ultra-high-frequency Data can be found here.

Quote from cosine:

The idea is that the trader who hits your quote either detains directional information on the asset or not. If he does, you lose money. If he does not, prices revert to their previous state, and you gain money.

The point is to trade on noise, and to get out of the market early when information shocks hit the market and are assimilated into prices. This powerpoint presents methods for predicting those information shocks, measured as increases in volatility. Ultra high-frequency GARCH and ACD models are easily implemented and calibrated to market for use in algorithmic trading (using matlab or similar software). The paper "Econometrics of ultra-high frequency data", on p. 30, shows the high statistical significance of inverse duration of last trade to explain the conditional variance of the next price movement (see z-stat of 1/dur impact on variance). Last paper demonstrates similar results, with different methodology.

Engle is a nobel prize laureate (unlike grob109). I think we can trust his results.

Institutionals already use this. Maybe so should you, before thinking of beating the market. (This is a constructive critic only). Volumes and durations in a ACD/ACM model will be much more helpful to you in identifying information risk, then any signal event you perceive as a predictor of when to exit.

These will be my last words on the subject. If people are interested in continuing this in private, you can send me a private message so we can exchange emails.

Good luck in your research and hard work!

Your friend, cosine