Download e-book for iPad: All About High-Frequency Trading by Michael Durbin

By Michael Durbin

ISBN-10: 0071743448

ISBN-13: 9780071743440

A specific PRIMER ON contemporary so much refined AND arguable buying and selling TECHNIQUE

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

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

  • The markets within 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 strategies for construction a high-frequency buying and selling process
  • The ongoing debate over the benefi ts, dangers, and ever-evolving way forward for high-frequency trading

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Example text

06. 07|500 34 All About High-Frequency Trading Ann knows she would earn two dollars if and when someone hits her bid. Rather than risk it, however, she improves her quote by a penny. 05. She returns those shares to whomever she borrowed them from, closing out her short position. 05, she has earned a dollar. The scenarios so far illustrate the risk market-makers take, risk for which they are compensated when they earn the spread. And if we extend it slightly, it illustrates another dynamic. 07, sees Ann improve her bid and decides to join her price with a 500-lot bid of his own.

We won’t even touch on longterm strategies, such as what type of securities to invest in, how long to hold them, portfolio diversification, and so on. Those can—and do—fill books all on their own. 43 44 All About High-Frequency Trading Do these pages describe all strategies traders use to make all that money we read about? Every one of them? Yes! I mean no. Would that such a book existed. As you would expect, there are plenty more strategies than just these. Trading strategies are the secret sauce of any trading firm.

The interest of a market-maker is unabashedly simple: they want to buy at one price and sell at some higher price, completing the round-trip, as it were, to earn the difference as a profit. So market-makers work to earn the spread—and the wider the spread the better. This is, of course, the exact opposite of investors, who prefer tighter markets. If market-makers could always make pairs of offsetting trades, buying low and selling high, there would be no risk. But this is decidedly not the case.

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All About High-Frequency Trading by Michael Durbin


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