Book Image

Developing High-Frequency Trading Systems

By : Sebastien Donadio, Sourav Ghosh, Romain Rossier
5 (1)
Book Image

Developing High-Frequency Trading Systems

5 (1)
By: Sebastien Donadio, Sourav Ghosh, Romain Rossier

Overview of this book

The world of trading markets is complex, but it can be made easier with technology. Sure, you know how to code, but where do you start? What programming language do you use? How do you solve the problem of latency? This book answers all these questions. It will help you navigate the world of algorithmic trading and show you how to build a high-frequency trading (HFT) system from complex technological components, supported by accurate data. Starting off with an introduction to HFT, exchanges, and the critical components of a trading system, this book quickly moves on to the nitty-gritty of optimizing hardware and your operating system for low-latency trading, such as bypassing the kernel, memory allocation, and the danger of context switching. Monitoring your system’s performance is vital, so you’ll also focus on logging and statistics. As you move beyond the traditional HFT programming languages, such as C++ and Java, you’ll learn how to use Python to achieve high levels of performance. And what book on trading is complete without diving into cryptocurrency? This guide delivers on that front as well, teaching how to perform high-frequency crypto trading with confidence. By the end of this trading book, you’ll be ready to take on the markets with HFT systems.
Table of Contents (16 chapters)
1
Part 1: Trading Strategies, Trading Systems, and Exchanges
5
Part 2: How to Architect a High-Frequency Trading System
10
Part 3: Implementation of a High-Frequency Trading System

Strategy making decisions on when to trade

The trading strategy is the system's brain. This is where we will put our algorithm that represents our trading concept into action. Let's take a look at the diagram:

Figure 2.7 – Trading strategy receiving data from the book builder to make a decision on when to trade

The diagram shows that the trading strategy is divided into two main components, signal and execution:

  • The signal component of this strategy only focuses on generating signals. However, having the intention (a signal) does not guarantee you will get the liquidity you are interested in. For instance, in HFT, it is highly likely your orders will be rejected because of the speed of your trading.
  • The execution part of the strategy will take care of handling the response from the market. This part decides what to do for any responses from the market. For instance, what should happen when the order is rejected? You should continue...