Hacking a HFT system

Compared with machine learning or signal processing algorithms of conventional trading strategies, High Frequency Trading systems can be surprisingly simple. They need not attempt to predict future prices. They know the future prices already. Or rather, they know the prices that lie in the future for other, slower market participants. Recently we got some contracts for simulating HFT systems in order to determine their potential profit and maximum latency. This article is about testing HFT systems the hacker’s way. Continue reading “Hacking a HFT system”

Bye Yahoo, and thanks for all the fish

Just a quick post in the light of a very recent event. Users of financial functions of R, MatLab, Python, or Zorro got a bad surprise in the last days. Scripts and programs based on historical price data suddenly didn’t work anymore. And our favorite free historical price data provider, Yahoo, now responds on any access to their API in this way:

Continue reading “Bye Yahoo, and thanks for all the fish”

Dear Brokers…

Whatever software we’re using for automated trading: We all need some broker connection for the algorithm to receive price quotes and place trades. Seemingly a simple task. And almost any broker supports it through a protocol such as FIX, through an automated platform such as MT4™, or through a specific broker API. But if you think you can quickly hook up your trading software to a broker API, you’re up for a bad surprise. Dear brokers – please read this post and try to make hacker’s and coder’s lifes a little easier! Continue reading “Dear Brokers…”

Build Better Strategies!

Enough blog posts, papers, and books deal with how to properly optimize and test trading systems. But there is little information about how to get to such a system in the first place. The described strategies often seem to have appeared out of thin air. Does a trading system require some sort of epiphany? Or is there a systematic approach to developing it?
   This post is the first of a small series in which I’ll attempt a methodical way to build trading strategies. The first part deals with the two main methods of strategy development, with market hypotheses and with a Swiss Franc case study. Continue reading “Build Better Strategies!”

I Hired a Contract Coder

You’re a trader with serious ambitions to use algorithmic methods. You already have an idea to be converted to an algorithm. The problem: You do not know to read or write code. So you hire a contract coder. A guy who’s paid for delivering a script that you can drop in your MT4, Ninja, TradeStation, or Zorro platform. Congratulations, now you’re an algorithmic trader. Just start the script and wait for the money to roll in. – Does this really work? Answer: it depends. Continue reading “I Hired a Contract Coder”

Hacker’s Tools

For performing our financial hacking experiments (and for earning the financial fruits of our labor) we need some software machinery for research, testing, training, and live trading financial algorithms. No existing software platform today is really up to all those tasks. So you have no choice but to put together your system from different software packages. Fortunately, two are normally sufficient. I’ll use Zorro and R for most articles on this blog, but will also occasionally look into other tools. Continue reading “Hacker’s Tools”

Seventeen Trade Methods That I Don’t Really Understand

When I started with technical trading, I felt like entering the medieval alchemist scene. A multitude of bizarre trade methods and hundreds of technical indicators and lucky candle patterns promised glimpses into the future, if only of financial assets. I wondered – if a single one of them would really work, why would you need all the rest? And how can you foretell tomorrow’s price by drawing circles, angles, bats or butterflies on a chart? Continue reading “Seventeen Trade Methods That I Don’t Really Understand”

Money and How to Get It

Contrary to popular belief, money is no material good. It is created out of nothing by banks lending it. Therefore, for each newly created lot of money there’s the same amount of debt. You’re destroying the money by repaying your credits. Since this requires a higher sum due to interest and compound interest, and since money is also permanently withdrawn from circulation by hoarding, the entire money supply must constantly grow. It must never shrink. If it still does, as in the 1930 economic crisis, loan defaults, bank crashes and bankruptcies are the result. The monetary system is therefore a classic Ponzi scheme. Continue reading “Money and How to Get It”