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High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems Hardcover – April 22, 2013
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From the Author
As time passes, HFT continues to evolve. HFT programs are smarter, better, and more advanced. The largest part of HFT today is devoted to market-making, a traditionally-human activity that is now being automated almost entirely, reducing transaction costs for all investors in the process. Market-making strategies are extensively covered in the 2nd edition of the book. Order execution models facilitating block trades are now dynamic, extending far beyond VWAP in complexity and skill. HFT risk management models and frameworks discussed in detail in the 2nd edition have come of age, too, driven by the desire of stable, consistently profitable operations.
The second edition of high-frequency trading incorporates important developments over the past four years. The book is completely rewritten based on my own trading and portfolio management experiences at ABLE Alpha Trading and our investment consulting clients, the classroom training sessions I've been leading with executives in the investments, brokerage, and trading business all over the world via HFTTraining.com, as well as my graduate students in the department of Finance and Risk Engineering in New York University, Polytechnic Institute, where I've been called upon to serve as an Industry Assistant Professor. The opportunity to explain my research to someone else, both relative novices at NYU and 20-40 year industry veterans at HFTTraining.com, made me rethink the organization of the book to streamline the exposition and to just make it better overall. While the 1st edition of my book detailed many data-driven models, the 2nd edition takes the explanation of old and brand-new HFT models to the next level, often presenting sophisticated ready-to-use frameworks.
Perhaps the most important development over the past four years has been an unparalleled adoption of high-frequency data for analysis and use. It can be hard to believe, but just four years ago many trading desks at top institutions did not think of archiving tick data beyond the 21-day audit trail required then by the regulators. With the realization that historical tick data is a useful and cost-effective tool in development of automated trading strategies, many organizations have been building up the data and competencies in the area. The materials in the new, 2nd, edition of the book cover the requirements of entering the HFT space and other relevant considerations.
HFT is no longer just a convenient way to trade. It is a solid part of Big Data Finance, and is here to stay. I had a great pleasure writing the book with the forward-looking Big-Data outlook in mind, and I hope you will enjoy reading it.
Top Customer Reviews
"FPGAs are programmed using special programming languages, such as Verilog or VHDL. The languages are similar to C programming language [sic] and are easy to learn. A special FPGA programming device translates Verilog or VHDL into Assembly language understood by the FPGA chips. In the absence of FPGAs, trading programs need to be compiled and translated to the computer chips like CPUs during program run time, requiring additional computer operations eating into latency. The process of programing an FPGA is rather straightforward and inexpensive." Page 24
For a small section of text, this includes a remarkable number of errors. Verilog does resemble C, but VHDL most certainly does not. It resembles Ada more than anything else.
When Verilog and VHDL are used to program FPGAs they are not translated into assembly language (the text form form of the CPU instruction set). These language are translated into logic "net lists", which describe the logic gates and interconnections for the logic design. The FPGA manufacturer usually provides a program that compiles the logic net list into the FPGA binary.
Verilog and VHDL are referred to as hardware design languages. You use these languages not to express a software algorithm, but a hardware design.Read more ›
Once Mrs. Aldridge deals with technical details, she makes (almost all) a severe blunder. E.g. FPGAs are used for HFT in accelerator-cards. I have some experience in FPGA based HPC applications (,). It is obvious that she has not the slightest idea about FPGAs. This was noted by other reviewers too. It is quite strange that she denies in a comment heir incompetence.
The book is full of odd technical remarks: "Genetic algorithms learn from past forecasts via the so called Bayesian approach". In fact Genetic algorithms and Bayesian methods are two independent concepts. There are any details missing, how this learning is done.
There is only one HFT-specific chapter. Mrs. Aldridge defends the HFT-business against allegations of other market participants and market-regulators. This part is also superficial and basically HFT-PR: HFT provides additional liquidity and liquidity is beneficial.
In my view nobody understands the market-mechanism. According the Geometric Brownian-motion standard model there should be regular market desasters, because a Brownian-motion is non stationary.Read more ›
This is a book that appears designed to boost the author’s resume without actually providing much practical, useful benefit to the reader.
That said, there are quite a few ideas here that might be useful in trading systems development generally. If you're a newcomer to systems development then you should read this in time when you can't be doing more productive things.
I develop and run proprietary HFT algo/platform and I have many recent books on this subject, but this book is by far the most useful one for the practitioners. There are some minor "bugs" in the book, like the line that says FIX protocol is "XML-based", where the author most likely meant "XML-like" (which some people might still disagree with). However, these are really negligible compared to the value of this book filled with real-life practical ideas for the latest HFT business.
If you think you know enough about HFT or if you want to satisfy yourself with rigorous mathematical proofs, try some other books. This is a book for practitioners and those who want to learn the most relevant concepts of HFT in a simple, easy-to-understand language. You don't need to be a technical person to understand most of the concepts.
I particularly liked the chapters on automated market making (ch. 10) and the use of Fourier analysis (ch. 15). I have written automated market making strategies but still found it useful. Very concise and easy to understand, the book successfully filters out unnecessary "noise" of irrelevant details.
Most Recent Customer Reviews
From an industry practitioner, this book lacks any depth and presents a weak overview of a complicated topic.Published 11 months ago by Amazon Customer
Written by one of the most knowledgeable professions in the business, this book covers all aspects of high frequency trading, both as a business and as a trading strategy. Read morePublished 12 months ago by Greg Lucas
Great content. Even when I work in financial Services and I' ve Belén teaching Finance for 5 years, this book vives Great insights into HFT. Read morePublished 15 months ago by Diego8a
This book presents an excelent introduction for High-Frequency Trading. You will need to get expirience to understand the area, but this book will give you a good start point. Read morePublished on December 5, 2013 by Amazon Customer