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I don't trade but I am interested in understanding what HFT and other algorithmic trading actually is (having been fooled by The Flash Boys into thinking it's something it's not and having been frustrated trying to find out what it really all is.

Any pointers gratefully rcvd




This blog is the best public description I've seen: https://mechanicalmarkets.wordpress.com/2015/01/13/trader-ty...


Np, lifeisstillgood. I'm busy at work today, so am afraid I can't give full-length explanations. However I'll provide some links to some of the ideas.

HFT: Most HFT strategies involves making a market or rebate trading.

https://en.wikipedia.org/w/index.php?title=Market_maker&sect... https://en.wikipedia.org/wiki/Day_trading#Rebate_trading

They leverage being co-located next to the exchange servers and trading algorithmically. Anyone can sign up (provided you have >500K capital).

http://www.lightspeedinstitutional.com/automated-trading/lig... http://limebrokerage.com/SystematicTrading/Network/CoLocatio...

Algorithmic Trading: HFT is form of algo-trading, just higher frequency. Most peeps in the WSJ article is probably hooked up to Interactive Brokers via Quantopian doing swing trading (entering and exiting a position on order of days or weeks).

Here is a good Quantopian back test: https://www.quantopian.com/posts/system-based-on-easy-volati...

The paper behind the back test: http://www.naaim.org/wp-content/uploads/2013/00R_Easy%20Vola...

The gist is selling VXX, the VIX 30-day synthetic futures when a VIX ratio indicates that it is too overpriced. But should give you an idea of how a backtest works and how signal (VIX ratio) is generated.

Options Trading: It's harder to explain options satisfactorily in short space of time (basically you can google Black-Scholes model, options, option greeks). There's a whole online retail community devoted to this and probably very cultish and strange to people who don't follow it; but if you want to check it out: (https://www.tastytrade.com/tt/)


Thanks to both of you- lots to sink my teeth into




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