Hft trading in futures

How has Algorithmic Trading Impacted the Futures Markets? - Tradingsim

A more important criticism of money management techniques is that they are typically highly path-dependent: The only way to properly evaluate this, I advised, was to backtest the strategy over many hundreds of thousands of test-runs using Monte Carlo simulation.

That would reveal all too clearly that the risk of ruin was far larger than might appear from a single backtest. Next, I asked him whether the strategy was entering and exiting passively, by posting bids and offers, or aggressively, by crossing the spread to sell at the bid and buy at the offer. I had a pretty good idea what his answer would be, given the volume of trades in the strategy and, sure enough he confirmed the strategy was using passive entries and exits.

High-Frequency Trading: Its Impact And Future | Seeking Alpha

Leaving to one side the challenge of executing a trade for 1, contracts in this way, I instead ask him to show me the equity curve for a single contract in the underlying strategy, without the money-management enhancement. It was still very impressive. But there is an underlying assumption built into these results, one that I have written about in previous posts: As a result, the actual performance of the strategy will be a very long way from the pretty picture shown in the chart of the hypothetical equity curve.

One way to get a handle on the problem is to make a much more conservative assumption, that your limit orders will only get filled when the market moves through them.

This can easily be achieved in a product like Tradestation by selecting the appropriate backtest option:. The strategy performance results often look very different when this much more conservative fill assumption is applied. Of course, the more conservative assumption applied here is also unrealistic: Under the optimistic fill assumption the equity curve looks as follows:.

Under the more conservative fill assumption, the equity curve is obviously worse, but the strategy continues to produce excellent returns. There is a fundamental reason for the discrepancy in the behavior of the two strategies under different fill scenarios, which relates to the very different microstructure of futures vs.

So the average trade: Of course, there are many other challenges to high frequency equity trading that futures do not suffer from, such as the multiplicity of trading destinations.

And there are a host of other differences in the microstructure of futures vs equity markets that the analyst must take account of. Futures [Jonathan Kinlay] Pretty obviously, he had been making creative use of the "money management" techniques so beloved by futures systems designers.

I invited him to consider how it would feel to be trading a 1,lot E-mini position when the market took a 20 point dive.

On the other hand, if you had already made millions of […]. Just type and press 'enter'. Futures April 11, Jonathan eMini Futures , Equities , Futures , High Frequency Finance , High Frequency Trading , Money Management 1 comment. This can easily be achieved in a product like Tradestation by selecting the appropriate backtest option: Under the optimistic fill assumption the equity curve looks as follows: Market Microstructure There is a fundamental reason for the discrepancy in the behavior of the two strategies under different fill scenarios, which relates to the very different microstructure of futures vs.

Equities , Futures , HFT , Market Microstructure , Money Management. Related Articles The Mathematics of Scalping May 16, Jonathan.

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