Abstract
Grid algorithmic trading has become quite popular among traders because it shows several advantages with respect to similar approaches. Basically, a grid trading strategy is a method that seeks to make profit on the market movements of the underlying financial instrument by positioning buy and sell orders properly time-spaced (grid distance). The main advantage of the grid trading strategy is the financial sustainability of the algorithm because it provides a robust way to mediate losses in financial transactions even though this also means very complicated trades management algorithm. For these reasons, grid trading is certainly one of the best approaches to be used in high frequency trading (HFT) strategies. Due to the high level of unpredictability of the financial markets, many investment funds and institutional traders are opting for the HFT (high frequency trading) systems, which allow them to obtain high performance due to the large number of financial transactions executed in the short-term timeframe. The combination of HFT strategies with the use of machine learning methods for the financial time series forecast, has significantly improved the capability and overall performance of the modern automated trading systems. Taking this into account, the authors propose an automatic HFT grid trading system that operates in the FOREX (foreign exchange) market. The performance of the proposed algorithm together with the reduced drawdown confirmed the effectiveness and robustness of the proposed approach.
Highlights
Algorithmic trading is a novel operating mode that involves the use of powerful automated algorithms, known as trading robots or expert advisors, which help traders on monitoring the specific market conditions in order to identify the best opportunities for buying or short selling the traded instruments
According to the specific rules properly processed by the aforementioned trading robots, an order may be opened or not
A grid trading strategy is a financial technique for which market operations of the same sign are opened appropriately spaced from each other until the overall balance of the whole operations reaches the desired gain
Summary
Algorithmic trading is a novel operating mode that involves the use of powerful automated algorithms, known as trading robots or expert advisors, which help traders on monitoring the specific market conditions in order to identify the best opportunities for buying or short selling the traded instruments. The adopted algorithmic trading could decide to close an operation or to manage the grid of trading operations in case this type of approach is adopted. In this context, the aim of this work is to show an innovative grid trading algorithm able to negotiate on the complex OTC (over the counter) market. A grid trading strategy is a financial technique for which market operations of the same sign are opened (all long or all short) appropriately spaced from each other (grid orders) until the overall balance of the whole operations (including all opened trades) reaches the desired gain. The distance between one trade and the characterizes the radius of the
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