Pair trading was invented 2 decades ago, simply automating its implementation has solely of late boot the bucket stylish alongside independent traders. But i time the spotlight is on, innovations come upwards fast as well as furious. Here are a expose of recent developments that I notice interesting:
1. I mentioned previously the software called quant2ib. It is an API which allows us to acquire marketplace information as well as post orders from a Matlab programme to Interactive Brokers (IB). I possess got used it extensively for our trading, as well as it is every bit reliable every bit IB's native API. Their latest version straightaway includes functions for constructing a "combo" security. This combo safety tin strength out move pairs of stocks, ETF's, futures, etc. (with the notable exception of currencies), as well as the API allows y'all to acquire marketplace information every bit good every bit to submit orders on a combo. This is a huge improvement because y'all tin strength out straightaway automatically merchandise a yoke of securities every bit i unit of measurement yesteryear submitting limit orders on the combo. (Previously, y'all would possess got had to submit marketplace social club on at to the lowest degree i side of the pair, as well as this would possess got required your programme to continuously monitor the marketplace prices as well as post orders when appropriate. Or else y'all had to surrender using the API as well as manually come inward a "generic combo" boundary social club inward IB's TWS.)
2. Alphacet Discovery likewise has the mightiness to post boundary orders on pairs, due to its partnership alongside Knight Trading. Besides, based on a present that I possess got of late seen, they likewise straightaway possess got cracking pairs portfolio as well as execution reporting functionality. (Full disclosure: I used to consult for them.)
3. IB itself has released a "Scale Trader" algorithm that tin strength out move applied to combos (see 1. above. Hat tip: Mohamed.) I can't explicate this improve than their press release: "... ScaleTrader algorithm allows clients to exercise weather nether which a long seat inward i stock is built spell simultaneously creating an offsetting curt seat inward the other. The ScaleTrader is named because investors tin strength out 'scale-in' to marketplace weakness yesteryear setting orders to purchase every bit the marketplace moves lower. Similarly, sell orders tin strength out move 'scaled' into when a marketplace is rising. The ScaleTrader algorithm tin strength out move programmed to purchase the spread as well as afterwards possess got lucre yesteryear selling the spread if the deviation reaches predetermined levels ready yesteryear the user." In other words, it allows us to automatically implement the "parameterless trading" or the "averaging-in" strategy that I blogged well-nigh previously without whatsoever programming on our part!
Speaking of yoke trading, I volition move pedagogy my begin New York workshop inward October. (My editor inevitably picks touristy locations for these workshops. My London workshop takes house across the street from the Tower of London, my New York workshop is across from the novel World Trade Center, as well as my Hong Kong workshop is inward the "Golden Mile" shopping district of Tsim Sha Tsui.)
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