Presenting of High-frequency Trading System
Subject Areas : Journal of Investment Knowledge
Mohsen Dastpak
1
(
M.A Student in Financial Engineering of Economic University
)
Mohammadali Rastgav
2
(
Associate Professor of Economic University
)
Keywords: Algorithmic trading, High-frequency Trading, Itraday Data, Tehran stock market,
Abstract :
In emerging markets such as Tehran Stock Market, there is a gap between signals of changing the trend and the beginning of the movements which we can make profit by using a well-designed Algorithmic Trading System. Proposing a high-frequency trading system has advantages (taking advantage of intraday stock market volatility) and disadvantages (high amounts of transaction cost due to the high transaction volume) thus we can augment advantages and cotrol the disadvantages by designing the system elaborately. In this research, the “Local Traders” approach for predicting the future trend of stock has been utilized. According to the “Local Traders” approach, there is a local trader (an agent) for each stock which is expert on it. It predicts the future trend of its own stock based on stock’s intraday data and their technical indicators by determining how much it is good to buy, sell or hold. Results show that, the proposed model outperforms the Buy and Hold strategy in all kinds of markets (Normal, Ascending, Descending) even if there is no discount on Transaction Costs.
