Algorithmic Trading Group Forum - Ultra high frequency FX

Nicolas Macherey

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Re: Ultra high frequency FX
Reply #30 - 07/04/09 at 06:00:47

Hi,

What kind of paradigm are you using for trading with ultra high frequency ?

I have implemented many tests that shows that it's not possible to trade forex with a frequency less than one hour, cause of slippages and commissions. It the same for many other stocks... More over liquidities are very difficult to manage in a UHF manner...

On the other side, I'd like to start a web site specialized for systematic traders (fully automatized) who wants to show their results and track records. The aim is to put in the same place many informations for traders who are looking for partnerships with money managers and CTAs.
Are you interested on it ?

regards
Nicolas

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floortrader Newbie Offline I like this forum! Posts: 12	Re: Ultra high frequency FX Reply #31 - 07/07/09 at 13:24:22 yes, I would be very interested in participating and supplying the start-up capital for the site. Think its a great idea to have a home base for all of the next gen algo trading minds.
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Nicolas Macherey Newbie Offline I love systematic trading Posts: 12 Lyon (FRANCE) Gender:	Re: Ultra high frequency FX Reply #32 - 07/08/09 at 06:43:55 Hi , Great, I started a new topic for this discussion in Professionnal Algo Trading Web Site in Software Infrastructure ... Thanks for your reply! you can mail me by my web site if you want to discuss about it (www.graymat.fr)
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BlackMage

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Re: Ultra high frequency FX
Reply #33 - 07/21/09 at 14:19:49

Nicolas Macherey wrote on 07/04/09 at 06:00:47:

What kind of paradigm are you using for trading with ultra high frequency ?

I have implemented many tests that shows that it's not possible to trade forex with a frequency less than one hour, cause of slippages and commissions.

My take on this is, that for trading on the highest frequencies there is absolutely no way around looking very deeply into the particular microstructure of the market(s) in question.

This article (and its references) could be a starting point:

http://www.cims.nyu.edu/~stoikov/LimitOrderBook.pdf

Knowledge of the particular market microstructure will amongst many other things be valuable in developing the order execution algorithms which are crucial for making HF work.

Since discussions on HF trading are few and far between (for obvious reasons) lets see if we can spark some renewed interest in this thread...

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Re: Ultra high frequency FX
Reply #34 - 07/21/09 at 15:23:29

Nicolas Macherey wrote on 07/04/09 at 06:00:47:

Hi,

What kind of paradigm are you using for trading with ultra high frequency ?

I have implemented many tests that shows that it's not possible to trade forex with a frequency less than one hour, cause of slippages and commissions. It the same for many other stocks... More over liquidities are very difficult to manage in a UHF manner...

My experience so far (Nicolas, as I mentioned before, I use regression machinery similar to yours):

Sub 1m: Successfully picking up structures that are tradable, but slippage and commissions eat up 70 to 80% of returns. Very risky.
1m: More structures emerge, the proportion of slippage and commissions reduces, but remains very volatile. Some of the patterns can be traded during the Asian hours.
15m - 1m: This is my favourite frequency range! I like lots of small low-risk trades. They allow me to keep an eye on stats and timely detect regime shifts to either pull out or retrain.

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Re: Ultra high frequency FX
Reply #35 - 07/21/09 at 15:36:26

BlackMage wrote on 07/21/09 at 14:19:49:

Nicolas Macherey wrote on 07/04/09 at 06:00:47:

What kind of paradigm are you using for trading with ultra high frequency ?

I have implemented many tests that shows that it's not possible to trade forex with a frequency less than one hour, cause of slippages and commissions.

My take on this is, that for trading on the highest frequencies there is absolutely no way around looking very deeply into the particular microstructure of the market(s) in question.

There are funds out there consistently making money over the last few years whose trading algorithms can be scribbled in a few minutes on the back of a napkin. (They are probably smiling at me now Wink

)

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"Success is the sum of small efforts, repeated day in and day out..."

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lp Newbie Offline I like this forum! Posts: 2	Re: Ultra high frequency FX Reply #36 - 07/27/09 at 16:18:44 Hi, Can anyone recommend some good books or papers explaining how to use GA, Swarm Intelligence, ANN, Fuzzy Logic Systems and the likes to design a systematic trading strategy. Also what kind of software is best suited for these applications, Matlab or similar? Thanks for the help, I am quite new to this area. lp
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DerikB Newbie Offline I like this forum! Posts: 10	Re: Ultra high frequency FX Reply #37 - 07/27/09 at 18:18:12 Hi, Try Neural Networks for Pattern Recognition (Paperback) by Christopher M. Bishop There is also another book with Matlab code. I couldn't find it but search amazon for neural network pattern recognition. Regards Derik
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Nicolas Macherey

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Re: Ultra high frequency FX
Reply #38 - 08/03/09 at 15:20:49

Hi,

You can try :

+ Rocket Science for Traders and MESA from John F. Ehlers
+ Electronic and Algorithmic Trading Technology, The Complete Guide
from Kendall Kim
+ Analysis of Financial Time Series from RUEY S. TSAY
+ Fuzzy Sets and Fuzzy Logic Theory and Application from George J. Klir and Bo Yuan
+ Support Vector Machines from Ingo Steinwart Andreas Christmann
+ Bayesian Statistics is also interesting
+ ...

There are many books that can be read... And many papers can be found in the Electrical Engineering group from IEEE.

regards

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Nicolas Macherey

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Re: Ultra high frequency FX
Reply #39 - 08/03/09 at 15:50:06

Algo Designer wrote on 07/21/09 at 15:23:29:

My experience so far (Nicolas, as I mentioned before, I use regression machinery similar to yours):

Sub 1m: Successfully picking up structures that are tradable, but slippage and commissions eat up 70 to 80% of returns. Very risky.
1m: More structures emerge, the proportion of slippage and commissions reduces, but remains very volatile. Some of the patterns can be traded during the Asian hours.
15m - 1m: This is my favourite frequency range! I like lots of small low-risk trades. They allow me to keep an eye on stats and timely detect regime shifts to either pull out or retrain.

Hi,
I can explain a little more what I mean by paradigm...
For example we can model the market using a predefined time frame and perform different algorithm analysis in order to take profitable (or trying to) decisions on a Close to Close manner without looking intrabar. The goal there could be to stay 100% of time in the market either Long or Short.

We can also model the market using a shorter time frame, to identify turn-key trading points. The goal is to take Long/Short positions to capture short term trends and to get out on predefined SL or TP targets. This can be used for example during market openning hours...

However, this can be achieve by identifying market partterns in technical indicators or in the market itself. Now, the problem is to manage the models stability... The paradigm used in your trading model can be very important. More over, even if your trading stratgey is modelled by a very small number of parameters you can have strong divergences between a backtest use and a Real Time use. I know by experience that even if large unseen data sets are used for the validation process, this will not necessarily be significant for the future. (kind of cheat...)

regards

Nicolas

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Pankaj Kumar

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Re: Ultra high frequency FX
Reply #40 - 08/28/09 at 08:24:18

Nicolas Macherey wrote on 04/07/09 at 10:29:08:

Hi,

I am developping automatic forex trading strategies in a middle High Frequency mode. (60 min to daily charts).
My business is oriented toward the developpement of fully automated trading strategies starting from historical price data and going to order generation. (Market neutral, Absolute returns...)
If you need any info...

I am working on my phd thesis which is model one such strategies.I would be obliged you you can share the details..my id is kumar.x.pankaj@gmail.com

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lp Newbie Offline I like this forum! Posts: 2	Re: Ultra high frequency FX Reply #41 - 08/29/09 at 15:41:03 Thanks guys for the books recommendations.
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Cat

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Re: Ultra high frequency FX
Reply #42 - 09/07/09 at 11:08:03

I was recently invited to the following seminar - Dr. Aly Kassam — Implementing High Frequency Trading Algorithms Ten Times Faster.

Abstract

This presentation will discuss some of my investigations into the use of a set of visual programming tools to develop and deploy high frequency program trading systems. The tools are well developed and used in other engineering disciplines, but as yet relatively new for finance. In particular we will look at a new design paradigm — Model Based Trading — together with automatic HDL and C-code generation from models and deployment to specific hardware including DSP boards.

Speaker

Aly Kassam has had a long working relationship with The MathWorks Ltd — the creators of MATLAB — where he is currently a Principal Application Engineer for Computational Finance. Prior to this he worked for a couple of years as a program trader at Barclays Capital in London. He has a degree in Astronomy and Physics along with a Masters in Nonlinear Dynamics and Chaos from UCL in London, and a Doctorate in Numerical Methods for PDEs from the Computing Laboratory at Oxford University.

Should anyone have specific questions, I can put you in contact with the Thalesians who organised this event and I'm sure they would be happy to help.

thanks

Cat Grin

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Cat Halliwell

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qroach Full Member Offline Posts: 102 London Gender:	Re: Ultra high frequency FX Reply #43 - 01/19/10 at 22:27:12 I just wanted to revive the thread. I am working for a high-freq shop myself at the moment but considering starting something of my own in some not so distant future. I am very interested in this discussion if there is still anybody around. Also, is anybody here who is doing quantitative trading/research in London area?
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Algo Designer Forum Administrator Offline Nihil desperandum Posts: 182 Sydney Gender:	Re: Ultra high frequency FX Reply #44 - 01/27/10 at 12:30:06 Hi Yuri, I would like to revive this thread as well. I truly hope I will have a little bit more time for the forum this year!
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