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

The Evolution of Trading
Amazon-exclusive content from author Irene Aldridge

It seems just yesterday traders were chit-chatting with their executing brokers or customers over the telephone, while processing orders. Now, the days of turtle trading are over. Fueled by the plummeting costs of computers, financial sector has managed to dramatically increase profitability by entrusting computers with data analysis, trade signal generation and trade execution. Computers, capable of processing information much faster than humans, began trading rapidly, opening and closing positions to capture minute oscillations in prices; a new discipline, dubbed high-frequency trading, was born.

Since its inception, in the early 1980s, high-frequency trading has evolved as computing capacity has grown. Just over the past 5 years, the daily volume of trades executed by computers has doubled. Alongside these developments, new ways to adapt academic research and to computerize trading activity have been developed.

While “geeks” often claim high-frequency trading as their domain, anyone with the basic knowledge of computer programming can also participate in high-frequency trading. Minimal investment is required. A computer set up to play online video games is in most cases fast and powerful enough to run a high-frequency trading system. The barriers for entry into the field of trading have never been lower.

As a result, the dominant players in the field shift frequently, the markets change and once-profitable strategies become obsolete. Such is the reality of today’s trading landscape. It is also a landscape of opportunity for anyone willing to apply their intellect to instruct computers to solve real-time dependencies in layers of market data. My book, High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems shows this opportunity through aggregating the knowledge required to profitably function in today’s trading environments.