- [Instructor] Now that we understand the basics…around practically putting together a trading algorithm,…it's important to understand a few pragmatic rules.…First of all, buying and selling with algorithms…is more complicated than it seems.…The reality is that the strategies and rules…behind an algorithm are just the beginning.…The process for buying or selling securities…based on those algorithms is going to vary significantly.…High-frequency trading firms, for example,…will often tap directly into a network…for an exchange in order to trade.…
In other words, they want that algorithm to be able…to seamlessly make all of the decisions…and then trade directly through the exchange…to do this as fast as possible.…Outside of the high-frequency traders though,…most quant firms have separate systems…for research versus trading.…So you might develop an algorithm…and then test it on one system and then put it into practice…on a completely different system.…Practically speaking, automating an algorithm to make…trade decisions directly can actually be very dangerous.…
Author
Michael McDonald
Released
3/14/2018Professor Michael McDonald provides a brief primer on securities markets. He explains how data helps investors forecast performance and automate trading. Then he moves into the practical steps: coming up with algorithmic trading rules and developing and testing an algorithm. Finally, he shows how the algorithm can be applied and eventually expanded to other securities. Anyone working in financial services, or interested in investing in the stock market, will be able to use these tutorials to understand and develop simple trading algorithms of their own.
- Define what a share of stock is.
- Classify the type of trading that attempts to capitalize on the bid-ask spread.
- Name the rule that can be used as a metric for Fed interference in the market.
- State the first step in a data analysis project.
- Identify the type of characteristic algorithmic trading relies on.
- Break down how VAR is used to manage risk.
Skill Level Intermediate
Duration
Views
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Introduction
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Welcome45s
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1. The Basics of Securities Markets
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Basics of stocks4m 10s
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Basics of stock markets3m 40s
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Basics of trading stocks4m 54s
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Algorithms in Excel2m 52s
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Stocks and the Fed2m 50s
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Big data in finance2m 19s
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2. Investing and Securities
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3. Building Algorithms
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Gather data for an algorithm3m 53s
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Design an algorithm3m 49s
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Test algorithm accuracy4m 54s
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Predict economic variables4m 34s
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Advanced algorithms3m 46s
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4. Using Trading Algorithms
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Conclusion
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Next steps51s
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Video: Buy and sell with an algorithm