Algorithmic Trading
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Algorithmic Trading
Algo Trading Tips, Strategies, and Techniques
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Three Consecutive Higher Closes

This system trades a variation of the “3 higher closes” strategy on the SPY index ETF.  It trades from the long side only, using the following entry criteria: Buy SPY at the close if It has closed higher three consecutive days in a row and each...
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When 90% Down Days Are Followed By 90% Up Days

When 90% Down Days Are Followed By 90% Up Days | Algorithmic Trading | Scoop.it

"After seeing over 90% of the volume come to the downside on Monday, Tuesday registered a 90%+ upside volume day. A 90% down followed by a 90% up day is something that was never seen from 1970 – 2006. But this is the 10th time we’ve seen it happen since the beginning of 2007..."

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Strong Closes for Very Modest Gains

"...when SPY closes strong (in the top 10% of its range) but still only manages a small gain on the day, that the next day has a downside tendency"

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The 1987 Stock Market Crash

http://theeconicon.blogspot.com/2011/01/1987-stock-market-crash.html In finance, Black Monday refers to Monday, 19 October 1987, when stock markets around th...
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Mean Reversion: What changed in 1987?

Mean Reversion: What changed in 1987? | Algorithmic Trading | Scoop.it

"After the crash '87 the mean reversion composite shows almost no skew while the returns of the back tested trades before '87 are negatively skewed. However, because of the market offering more opportunities for mean reversion after '87 the back test shows clearly more trades, while having less return volatility. The two periods show a totally different market environment for mean reversion approaches."

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Your worst Drawdown is yet to come

Your worst Drawdown is yet to come | Algorithmic Trading | Scoop.it

"Drawdown may have a role in manager risk control, but it should be used with caution, and should be calculated with reference to probability (95%, 99% confidence level) from the characteristics of the underlying process rather than purely from the historical track record..."

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Rise of the Machines: Algorithmic Trading in the Foreign Exchange Market (Fed paper)

"We study the impact that algorithmic trading, computers directly interfacing at high frequency with trading platforms, has had on price discovery and volatility in the foreign exchange market..."

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A Simple “Follow the Leader” Algorithm

A desirable goal of relative strength investing or any type of portfolio algorithm would be to track the best stock/asset from a group of stocks/assets in hindsight. In other words, we wish to use ...
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The Rise of Developeronomics

The Rise of Developeronomics | Algorithmic Trading | Scoop.it
There is a theory in evolutionary biology that reciprocal altruism and cooperation first appeared as a solution to the food storage problem.
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Clever Algorithms: Nature-Inspired Programming Recipes

A nice overview of Bio-Inspired algorithms, including Genetic Algorithms, Genetic Programming, Simulated Annealing, Neural Networks, Particle Swarms, Ant Colonies, Artificial Immune Systems, etc (click on title for article).
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Data Mining Bias: The Risk of Picking an Inferior Rule

A quick study on how to avoid every algo trader’s worst enemy (or at least one of them): the dreaded Data Mining Bias (click title for article).
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Taking on trading desk risk: the lessons of UBS and MF Global

Taking on trading desk risk: the lessons of UBS and MF Global | Algorithmic Trading | Scoop.it
Sloppiness in banks' risk management of trading operations seems to have been a serious contributing factor to catastrophic failures.
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The ABCs of Re-hypothecation in Gold and Securities Markets: What You Need to Know

With its recent connection to the MF Global bankruptcy, hypothecation is engendering fear among investors. Is that fear warranted?
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IB Now Offers “Quote Booster Packs”

According to their post on ET, Interactive Brokers is now offering additional streaming quotes at a cost of $30/mo per pack of 100 quotes, with a a maximum of 1100 quotes total.  As before, the first 100 quotes are free (so long as you do a few...
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Nuts & Bolts: Survivorship Bias

Survivorship Bias (SB) is a plague to most trading system developers.  Pick any basket of stocks to trade and you’ve just introduced it into your results, especially if that basket is a collection of index components (like the S&P500, Nasdaq 100,...
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Forex Trend Following Martingale System

This is not a normal Martingale EA - it is a Special Martingale by ExpertTrader. While most Martingale fail in trending, this Martingale follow the trend, in...
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The Impact of Survivorship Bias

This post is about the impact of survivorship bias on various types of strategies. I want to look at mean-reversion as well as trend-follow strategies to see how their performance gets impacted by ...
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Fading the Up Gap

An interesting intraday strategy whose performance has unfortunately has degraded since 2009.   Conceptually, its fairly simple:  Trade a portfolio of ETFs and at the open of each day short the two with the largest volatility-normalized up gap, ...
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Monte Carlo Resampling of Equity Curves Using N-Bar Segments (paper)

Very readable paper on MC resampling techniques.  Classic MC techniques tend to generate smoother equity curves with shallower drawdowns than actual live results, as  they “chop up” returns too finely, thereby reducing the impact of the serial correlation...
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Global Optimization Algorithms: Theory and Application (e-book)

Well written e-book on various optimization strategies using bio-inspired/evolutionary techniques (click title).
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A New Approach for Coping with Abnormal Markets: Shades of Grey

A New Approach for Coping with Abnormal Markets: Shades of Grey | Algorithmic Trading | Scoop.it
I’ve been writing a bit lately about how our own YK Strategy, despite doing very well in real-time in all different market types, fell down badly when the market made an extreme divergence from h...
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Crashes and High Frequency Trading (paper)

Crashes and High Frequency Trading (paper) | Algorithmic Trading | Scoop.it

“This report thus suggests a largely positive answer to the question: “Can high frequency trading lead to crashes?” We believe it has in the past, and it can be expected to do so more and more in the future. Flash crashes are not fundamentally a new phenomenon, in that they do exhibit strong similarities with previous crashes, albeit with different specifics and of course time scales. As a consequence of the increasing inter-dependences between various financial instruments and asset classes, one can expect in the future more flash crashes involving additional markets and instruments...”

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"It's Not A Market, It's An HFT 'Crop Circle' Crime Scene" - Further Evidence Of Quote Stuffing Manipulation By HFT

"It's Not A Market, It's An HFT 'Crop Circle' Crime Scene" - Further Evidence Of Quote Stuffing Manipulation By HFT | Algorithmic Trading | Scoop.it
Recently we posted a required reading analysis by Nanex in which the market trading analytics firm presented irrefutable evidence of quote stuffing by HFT algorithms in tens of stocks, in which thousands of cancelled quotes would reappear each...
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