Strategy Trading

The term “High-Frequency Trading” has taken on an air of mystery to people outside the world of electronic trading. For some, it may conjure imagery of shadowy forces secretly controlling the global stock markets. Others might have heard it’s possible to get rich without ever leaving their computer just by booting up trading software. The reality of HFT is, of course, less grandiose. While high frequency trading offers an excellent business opportunity for those with the right skill-set and resources, it is not the next step in progression for a novice trader. It requires a significant investment of time and capital as well as existing business relationships to have order flow executed...

Financial markets undergo constant evolution, so developing successful trading strategies requires equally constant iteration and innovation. However, releasing an unproven strategy into a live trading environment poses too significant a liability when real money is on the line. Backtesting is an indispensable tool that developers can take advantage of to limit this risk.

The growth of algorithmic trading over the last decade has made a huge impact on the markets, effectively automating order execution in ways previously unthought of. Today, it is estimated that around 60% of trades are executed by computer systems, and that number looks set to grow over the next decade. However, some have argued that algo trading is a victim of its own success, and the countless algorithms currently available make choosing and justifying allocation increasingly difficult.