The Evolution of Trading
Amazon-exclusive content from author Irene Aldridge
It seems just yesterday traders were chit-chatting with their executing brokers or customers over the telephone, while processing orders. Now, the days of turtle trading are over. Fueled by the plummeting costs of computers, financial sector has managed to dramatically increase profitability by entrusting computers with data analysis, trade signal generation and trade execution. Computers, capable of processing information much faster than humans, began trading rapidly, opening and closing positions to capture minute oscillations in prices; a new discipline, dubbed high-frequency trading, was born.
Since its inception, in the early 1980s, high-frequency trading has evolved as computing capacity has grown. Just over the past 5 years, the daily volume of trades executed by computers has doubled. Alongside these developments, new ways to adapt academic research and to computerize trading activity have been developed.
While “geeks” often claim high-frequency trading as their domain, anyone with the basic knowledge of computer programming can also participate in high-frequency trading. Minimal investment is required. A computer set up to play online video games is in most cases fast and powerful enough to run a high-frequency trading system. The barriers for entry into the field of trading have never been lower.
As a result, the dominant players in the field shift frequently, the markets change and once-profitable strategies become obsolete. Such is the reality of today’s trading landscape. It is also a landscape of opportunity for anyone willing to apply their intellect to instruct computers to solve real-time dependencies in layers of market data. My book, High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems
shows this opportunity through aggregating the knowledge required to profitably function in today’s trading environments.
From the Inside Flap
Financial markets are undergoing rapid innovation due to the continuing proliferation of computer power and algorithms. These developments have created a new investment discipline called high-frequency trading. Despite the demand for information on this topic, little has been published to help investors understand and implement high-frequency trading systemsuntil now.
Written by industry expert Irene Aldridge, High-Frequency Trading offers the first applied "how to do it" manual to building high-frequency systems.Covering sufficient depths of material to thoroughly pinpoint issues at hand, High-Frequency Trading leaves mathematical complexities to their original publications, referenced throughout the book.
Page by page, this accessible guide:
Discusses the history and business environment of high-frequency trading systems
Reviews the statistical and econometric foundations of the common types of high-frequency strategies
Examines the details of modeling high-frequency trading strategies
Describes the steps required to build a quality high-frequency trading system
Addresses the issues of running, monitoring, and benchmarking high-frequency trading systems
Along the way, this reliable resource skillfully high-lights numerous quantitative trading strategiesfrom market microstructure and event arbitrage to deviations arbitrageand puts the creation and management of portfolios based on high-frequency strategies in perspective.
High-frequency trading is a difficult, but profitable, endeavor that can generate stable profits in various market conditions. But solid footing in both the theory and practice of this discipline are essential to success. Whether you're an institutional investor seeking a better understanding of high-frequency operations or an individual investor looking for a new way to trade, this book has what you need to make the most of your time in today's dynamic markets.