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Algorithmic trading

About: Algorithmic trading is a research topic. Over the lifetime, 6718 publications have been published within this topic receiving 162209 citations. The topic is also known as: algotrading & Algorithmic trading.


Papers
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Journal ArticleDOI
TL;DR: This article showed that even information that is publicly and simultaneously released to all market participants is largely impounded into prices via the key micro-level price determinant, order flow, and found that between a half and two thirds of price relevant information is incorporated into prices through the trading process.
Abstract: Under rational expectations and efficient markets, the news contained in public information announcements is directly impounded into prices with there being no role for trades in this process of information assimilation. This paper directly tests this assertion using transaction level exchange rate data and a sample of scheduled macroeconomic announcements. The main result of the paper is that even information that is publicly and simultaneously released to all market participants is largely impounded into prices via the key micro-level price determinant — order flow. We quantify the role that order flow plays and find that between a half and two thirds of price relevant information is incorporated into prices via the trading process.

206 citations

Journal ArticleDOI
TL;DR: In this paper, a trading system consisting of rules based on combinations of different indicators at different frequencies and lags was developed by a genetic algorithm applied to a number of indicators calculated on a set of US Dollar/British Pound spot foreign exchange tick data from 1994 to 1997 aggregated to various intraday frequencies.
Abstract: Technical analysis indicators are widely used by traders in financial and commodity markets to predict future price levels and enhance trading profitability. We have previously shown a number of popular indicator-based trading rules to be loss-making when applied individually in a systematic manner. However, technical traders typically use combinations of a broad range of technical indicators. Moreover, successful traders tend to adapt to market conditions by 'dropping' trading rules as soon as they become loss-making or when more profitable rules are found. In this paper we try to emulate such traders by developing a trading system consisting of rules based on combinations of different indicators at different frequencies and lags. An initial portfolio of such rules is selected by a genetic algorithm applied to a number of indicators calculated on a set of US Dollar/British Pound spot foreign exchange tick data from 1994 to 1997 aggregated to various intraday frequencies. The genetic algorithm is subseque...

205 citations

Journal ArticleDOI
TL;DR: This paper showed that noise trading is an important contributor to asymmetric effects in the response of volatility to news, and that futures trading improves market dynamics in processing news by transferring noise trading from spot to futures markets.
Abstract: The asymmetric response of volatility to news has been attributed to leverage effects, but the authors show that noise trading is an important contributor to asymmetric effects. Contrary to the traditional view, introducing futures trading has no detrimental impact on the underlying markets. Futures trading improves market dynamics in processing news by transferring noise trading from spot to futures markets.

204 citations

Journal ArticleDOI
TL;DR: In this article, the authors test whether moving average trading rule profits have declined over the period from 1971 to 2000, using 18 exchange rate series over a longer time period than in previous studies.
Abstract: Previous studies have reported mixed results regarding the success of technical trading rules in currency markets. Abnormal returns were observed in many studies using data up to the mid 1980s, while more recent studies generally report less success for technical trading rules. This paper tests whether moving average trading rule profits have declined over the period from 1971 to 2000. If so, previous profits may represent a temporary inefficiency that has since been eliminated in the currency markets. The hypothesis is tested using 18 exchange rate series over a longer time period than in previous studies. Rules are optimized for successive 5-year in-sample periods from 1971 to 1995 and tested over subsequent 5-year out-of-sample periods. Results show that risk-adjusted trading rule profits have declined over time-from an average of over 3% in the late 1970s and early 1980s to about zero in the 1990s. Thus, market inefficiencies reported in previous studies may have been only temporary inefficiencies.

204 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
202397
2022190
2021144
2020167
2019126
2018160