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Learn Algorithmic Trading

Learn Algorithmic Trading

By : Sebastien Donadio, Sourav Ghosh
3.8 (10)
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Learn Algorithmic Trading

Learn Algorithmic Trading

3.8 (10)
By: Sebastien Donadio, Sourav Ghosh

Overview of this book

It’s now harder than ever to get a significant edge over competitors in terms of speed and efficiency when it comes to algorithmic trading. Relying on sophisticated trading signals, predictive models and strategies can make all the difference. This book will guide you through these aspects, giving you insights into how modern electronic trading markets and participants operate. You’ll start with an introduction to algorithmic trading, along with setting up the environment required to perform the tasks in the book. You’ll explore the key components of an algorithmic trading business and aspects you’ll need to take into account before starting an automated trading project. Next, you’ll focus on designing, building and operating the components required for developing a practical and profitable algorithmic trading business. Later, you’ll learn how quantitative trading signals and strategies are developed, and also implement and analyze sophisticated trading strategies such as volatility strategies, economic release strategies, and statistical arbitrage. Finally, you’ll create a trading bot from scratch using the algorithms built in the previous sections. By the end of this book, you’ll be well-versed with electronic trading markets and have learned to implement, evaluate and safely operate algorithmic trading strategies in live markets.
Table of Contents (17 chapters)
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1
Section 1: Introduction and Environment Setup
3
Section 2: Trading Signal Generation and Strategies
6
Section 3: Algorithmic Trading Strategies
10
Section 4: Building a Trading System
14
Section 5: Challenges in Algorithmic Trading

Designing a limit order book

A limit order book is a component that gathers all the orders and sorts them in a way that facilitates the work of the trading strategy. The order book is used by exchanges to maintain sell and buy orders. When we trade, we need to get the book of the exchange to know which prices are the best or just to have a view on the market. Because the exchange is located on another machine, we will need to use the network to communicate changes on the exchange book. For that, we have two methods:

  • The first method is to send the whole book. You will realize that this method would be very slow, especially when the exchanges is as large as NYSE or NASDAQ. This solution is not scalable.
  • The second method is to first send the whole book (like the first method), but then instead of sending the whole book each time there is an update, we just send the update...

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