- [Instructor] Now, as hopefully you're starting to see,…when it comes to algorithmic trading,…there's a variety of different types of data…that we can look at to try and come up with…profitable trading strategies.…The reality is that many different factors…influence stocks and markets overall,…but the Federal Reserve is one example of this.…The U.S. Fed sets interest rates in the economy…and because of that the Fed has a significant influence…on the economy as a whole.…Because of their influence on the economy,…the Fed plays a role in the markets…and in the stock markets in particular,…especially on a short term basis.…
All of this is very important when it comes…to algorithmic trading.…We might try to capitalize on the Fed's movements…using some sort of an algorithm.…One opportunity to do this is through…what we call the Taylor Rule.…The Taylor Rule is named for Stanford economist,…John Taylor, and essentially it just tells us what…the level of the interest rates should be in the economy.…So, if the Taylor Rule, for example, says that the level…
Professor 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.