High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems

by Irene Aldridge

A hands-on guide to the fast and ever-changing world of high-frequency, algorithmic trading

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.

This book covers all aspects of high-frequency trading, from the business case and formulation of ideas through the development of trading systems to application of capital and subsequent performance evaluation. It also includes numerous quantitative trading strategies, with market microstructure, event arbitrage, and deviations arbitrage discussed in great detail.

Contains the tools and techniques needed for building a high-frequency trading system Details the post-trade analysis process, including key performance benchmarks and trade quality evaluation Written by well-known industry professional Irene Aldridge Interest in high-frequency trading has exploded over the past year. This book has what you need to gain a better understanding of how it works and what it takes to apply this approach to your trading endeavors.

Genres: Finance, Computer Science, Economics

353 pages, Kindle Edition

First published December 1, 2009

Reviews

[Ayush · Rating 3 out of 5]

An 'OK' introduction for a beginner to the rapidly growing world of High-Frequency trading. This book is broad in content and focuses on theoretical rather than practical aspects of the profession. The main value of this book is that it showers you with references to milestone research papers (albeit outdated) in different sub-fields of the genre from time to time like market micro-structure, limit order book liquidity dynamics and statistical arbitrage which could probably allow you to come up with your own HFT strategy if you dig deep. Lastly, this book is intended for HFT Quant Researchers and not HFT software engineers/trade executioners in the sense that its focus is on generating alpha through sophisticated stochastic/game-theoretic quantitative models rather than through optimization of low-latency infrastructure/hardware/software code

[Mitchell Friedman · Rating 2 out of 5]

So I'm working in FinTech at the moment. And therefore looking for books that talk about implementation around selling and managing stocks, bonds, mutual funds and the like. And this was the closest I found at my library. It was not very close.

It did have a chapter on implementation. And some of that had value. And some of that chapter was about doing a waterfall software development.

A lot of this book was math. Math around optimize make money on statistical analysis, taking advantage on what could essentially be a sure thing. I'm not a big fan of math chapters.

But the terminology seemed valuable. And the general categories of the problems might be interesting to follow-up on.

[Jairo Fraga · Rating 3 out of 5]

The book discusses basic topics of HFTs, such as message structure and server co-location. It explores communication protocols, including the functioning of limit order books and the dynamics of large market orders.

It details explicit and implicit trading costs, with a particular emphasis on latency costs and market impact. It illustrates how the market impact, measured by the adverse change after an order, has become one of the main determinants of transaction costs.

It provides an analysis of metrics such as return, volatility, and drawdown. The concepts of alpha and beta are described as essential for evaluating investment performance, along with other parameters like skewness and kurtosis.

It examines how markets respond to macroeconomic announcements and the significance of high-frequency trading in capitalizing on rapid price adjustments. It brings focus to the need for constant order flow monitoring.

It showcases examples of how Fourier analysis and the Fourier transformation help detect order flow patterns trying to camouflage themselves.

Technical aspects, such as the FIX protocol, are detailed, elucidating the essence of efficient financial information transmission and the importance of a well-tested system to avoid catastrophic costs.

A mediocre book; I expected much more from such a complex topic.

Estimated reading time: 4 hours

[Andrew · Rating 4 out of 5]

Will you be able to run a successful high-frequency trading shop after reading this book? No.
It does provide a wide overview of published articles on HFT and some related topics, mostly useful for academically inclined and new to the field.

[Suyash Mallik · Rating 3 out of 5]

very good 101 for HFT, despite not going to into much detail

[Austin · Rating 2 out of 5]

This book is pretty devoid of content (shocker -- those that can do, those that can't teach), and the author's reputation among those that I know who have met her is laughable at best. The only valid reason I can think of for buying this book is for the bibliography, which seems to contain references to lots of academic papers and the like.

[Maciej Janiec · Rating 2 out of 5]

Quite broadly but very shallowly and without insight into actual workings of the funds covers some very basic and rather theoretical aspects of the high frequency trading.

One will find much more about the mechanics of HFT studying the likes of Nanex research.

[John · Rating 4 out of 5]

I know people say this book sucks but while it didn't have a ton of new stuff. I took notes off some of the "new to me" concepts and thought it was solid. I will go back and reference it again.

[Jack Gidding · Rating 5 out of 5]

Nice book, well done. Covers pretty much everything

[Chris Donnan · Rating 4 out of 5]

No book will tell you how to go make free money.
Good overview of (mostly older) relevant microstructure literature.

[Max Malysh · Rating 3 out of 5]

Works great as a brief introduction to the high-frequency trading.