Trading in Milliseconds: MFT Strategies & Setup
1353 Learners
12 Hours
Looking to take your trading skills to the next level and use order flow to create a trading strategy? Our Medium Frequency Trading (MFT) course is the perfect opportunity to learn the ins and outs of the fast-paced trading style. In this course, you'll discover the secrets of order flow analysis, understand the different types of orders, and learn to execute your MFT strategy.
So what are you waiting for? Sign up now and join the ranks of successful medium-frequency traders!
Level
Advanced
Author
Dr. Ernest P. Chan
Price Lifetime Access Limited Time Offer
₹13825/-₹55299/-
75% OFF
Get for ₹11060 with Course Bundle
- Live Trading
- Learning Track
- Prerequisites
- Syllabus
- About author
- Testimonials
- Faqs
Live Trading
- Recall the differences between low-frequency trading, medium-frequency trading, and high-frequency trading.
- Explain the impact of HFT trading games on MFT traders, such as front-running, ticking, ratio trade, spoofing, hide and light, and stop-hunting.
- Utilize different types of orders, such as inter-market sweep orders(ISO), immediate or cancel(IOC), and Day ISO to execute trades.
- Calculate the order flow using the tick rule, quote rule, Lee-Ready algorithm, and BVC rule.
- Analyse tick data to develop MFT trading strategies
- Backtest and evaluate the effectiveness of MFT trading strategies
- Design new MFT trading strategies based on order flow analysis and tick data research.
Skills Covered
Strategies
- Order flow trading using tick data
- Hide and light
- Stop hunting
- Ticking
Concepts & Trading
- Time and Volume bars
- Spoofing, Front-running
- IOC and ISO orders
- Lee-Ready Algorithm, BVC Rule
- Tick Data
Python
- Pandas
- Numpy
- Matplotlib
- Resample
- Expanding
learning track 8
This course is a part of the Learning Track: Advanced Algorithmic Trading Strategies
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Course Features
CommunityFaculty Support on Community
- Interactive Coding Exercises
Interactive Coding Practice
- Capstone Project
Capstone Project Using Real Market Data
- Trade & Learn Together
Trade and Learn Together
- Get Certified
Get Certified
Prerequisites
Fluency with Python including python libraries like Pandas, Numpy, Matplotlib, and a good understanding of financial markets.
Syllabus
- IntroductionMedium-frequency traders do not need expensive hardware in comparison to high-frequency traders. However, they are still faster in comparison to retail and low-frequency traders. This section introduces the course contents and a welcome address by Dr E P Chan. The interactive methods used in this course will assist you in not only understanding the concepts but also answering all questions about systematic options trading. This section explains the course structure as well as the various teaching tools used in the course, such as videos, quizzes, coding exercises, and the capstone project.
- An Introduction to Market MicrostructureIn this section, we will cover the key concepts of market microstructure.Market Microstructure05m 40s
Order Book5m
Bid-Ask Spread5m
Liquidity Makers5m
Market Impact5m
Importance of Bid-Ask Spread5m
- Need and Challenges of MFTIn this section, you will understand the different types of latency and the latency requirements for medium-frequency trading. Further, you will get an understanding of the challenges faced by medium-frequency traders.Definition of MFT2m
Latency and Trading Regimes5m
Types of Latency5m
Identification of Trader Based on Latency5m
Definition of Order Submission Latency5m
Definition of Order Status Latency5m
Trading Frequency5m
Why Should You Focus on MFT and its Challenges2m
Hardware Requirements of MFT5m
MFT Latency Tolerance5m
Consequence of High Regulations on HFT5m
Knowledge About HFT Strategies5m
Games Played by HFT5m
MFT Focus Areas5m
- HFT GamingCertain strategies employed by HFT firms are detrimental to the medium-frequency trader’s ability to generate revenue. One of these HFT strategies is called front-running. This section covers the concept of front-running and its impact on medium-frequency traders.Front-Running2m
Reason to Be Wary of HFT5m
Identification of Front-Running5m
Effect of Front-Running on MFT5m
Front-Running and Liquidity5m
Additional Reading2m
- Ticking StrategyIn the world of trading at high speeds, every tick counts. A tick is a minimum change in the price of a security. In ticking strategy, HFT firms research and bid just one tick above the best bid to maximise their revenue. In this section, you will see if the ticking strategy works and how HFT firms use it to their own advantage.Ticking Strategy2m
Bid Price in Ticking Strategy5m
Profitability of Ticking Strategy5m
Factors to Consider in Ticking Strategy5m
Ticking Strategy in Downtrend5m
Interpretation of Bid and Ask Size5m
Order Placement During Bid-Ask Imbalance5m
Steps Taken When Ticking Strategy Fails5m
Effect of Trend on Volatility5m
Impact of Volatility on Ticking Strategy2m
Use of Ticking Strategy5m
Ticking Strategy in Volatile Markets5m
Changes in Bid and Ask Volume5m
Academic Research in Imbalance in Bid and Ask Volume5m
- Impact of Ticking StrategyIn this section, you will see the impact of the ticking strategy on medium-frequency traders. You will also get a glimpse of how dark pools can be used again by MFT traders.Impact of Ticking Strategy on MFT2m
Definition of Slow Market Makers5m
Reason for No Order Fulfillment5m
Definition of Adverse Selection5m
Reason for Low Liquidity5m
Use of Dark Pool Against MFT Traders2m
Improvement of Order by Dark Pool Operator5m
Execution of Sub-penny Ticking by MFT5m
Execution of Sub-Penny Ticking5m
Impact of Dark Pools on MFT5m
Execution of Sub-penny Ticking by Dark Pool Operators5m
Ratio TradeMost markets operate on a first-come-first-serve basis. If your bid reached the exchange first, your bid would be executed first, and then other bidders with the same bid price would get their turn. But certain markets work on a pro-rata basis, where being first in line does not hold any special significance. In this section, you will see how HFTs use these markets to earn revenue with relatively less risk.Ratio Trade2m
Order Fulfillment in Time Priority Scenario5m
Order Fulfillment in Pro-Rata Priority5m
Advantage of Pro-Rata Priority for HFT5m
Time of Order Placement in Pro-Rata Priority5m
FAQ - Things to Keep in Mind2m
Additional Reading2m
- SpoofingSpoofing is an illegal practice where HFTs will place a large fake order to influence the market direction. Understand how this strategy is executed and why it is illegal.Spoofing2m
Impact of Total Bid Ask Volume on Price5m
Spoofing Orders5m
Execution of Selected Order5m
After Execution of Spoofed Order5m
Expectation After Cancellation of Large Order5m
Extraction of Profit From Spoofing Orders5m
Countering the Spoofing Strategy2m
Reason for Illegality of Spoofing5m
Call Bluff of Spoofing5m
Reaction to Bluff Being Caught5m
FAQ - Spoofing2m
Additional Reading2m
- Other Ways HFT WinsResearch indicates that stop orders cluster around round numbers. Can someone take advantage of this fact? Understand how HFT and other market participants could force a large-scale trigger of stop orders. HFTs do not always focus on earning revenue by buying and selling or vice versa. They will also use certain orders to earn rebates, which are provided to market participants to provide liquidity. See how HFT firms earn rebates and impact medium-frequency traders.Stop-Hunting2m
Reason for Clustering of Stop Orders5m
Execution of Stop Hunting5m
Profit Through Stop Hunting5m
Hide and Light Orders2m
Conditions to Claim a Rebate5m
Grant of Rebate5m
Way to Earn Rebate5m
Risk of Hide and Light Orders2m
Speed of Data Feeds5m
Lowering Risk of Hide and Light Order5m
Impact of Same Latency of ITCH and SIP Feeds5m
Additional Reading2m
- Thin NBBO LiquidityDue to the various games which HFTs play, other market participants are wary of providing liquidity. In the process, they will place orders which are of only 100 shares sometimes. Learn how this impacts the backtesting of medium-frequency traders’ strategies.Thin NBBO Liquidity2m
Reason for Placement of 100 Quantity Shares5m
Feasibility of NBBO Price for Backtesting5m
Consideration of Factors for Effective Backtesting5m
Test on Knowledge of HFT Gaming Practices10m
- An Overview of Types of OrdersHFTs employ a variety of order types for their gaming techniques, but certain order types can be optimised to counter these techniques. In this section, you will discover which order types can be used to build a defence by MFTs as well as which order types are used by HFTs for their gaming techniques.
Types of Orders3m 15s
Define the Type of Order5m
Order Type5m
Defence Against HFTs5m
Select the Order Type5m
- Immediate or Cancel OrderIn this section, you will learn how to employ Immediate or Cancel (IOC) orders as a defence mechanism against HFT gaming strategies that cause toxic order flows and adverse selectionImmediate or Cancel Orders4m 24s
IOC and Liquidity5m
Market and Limit Order5m
Adverse Selection5m
Last-look Functionality5m
Toxic Order Flows and Prevention of Adverse Selection3m 46s
Impact of Adverse Selection5m
Reason for Adverse Selection5m
Toxic Order Flows5m
Toxic Orders5m
Last-look in Forex Markets5m
FAQ on Immediate or Cancel Orders2m
Additional Reading on IOC Orders2m
- Intermarket Sweep OrderIn this section, you will learn about the mechanism of Intermarket Sweep Orders (ISOs). You will also learn the benefits that MFTs can gain by using this order type instead of a Non-ISO order type.Pre-Reading on Intermarket Sweep Orders2m
ISO and Regulation NMS4m 42s
Rule 6115m
Exception to Rule 6115m
Intermarket Sweep Order5m
ISO and Its Working5m
Understanding ISO with an Example3m 25s
Best Offer5m
Average Price5m
Non-ISO Drawbacks5m
Additional Reading on Intermarket Sweep Orders2m
- ISO and Flash CrashesAlthough ISOs can prove to be quite beneficial for MFTs, they are not free of limitations. This section explores the potential cautions of ISOs. It also studies certain theories behind the causes of flash crashes and the role of ISO in the occurrence of flash crashes.ISO and Flash Crashes6m 2s
Define a Flash Crash5m
Cause of Flash Crashes5m
One Cent Trades5m
Stub Quotes5m
Posting a Stub Quote5m
ISO Execution5m
Drawbacks of ISO5m
FAQ on Intermarket Sweep Order2m
Additional Reading on Flash Crashes2m
- Day ISOWhile Day ISOs are usually used by HFTs, it’s important that we make ourselves familiar with this order type. In this section, you’ll learn about the uses of Day ISOs, how they work, and how they can be beneficial for HFTs. This section also compares Hide and Light orders with Day ISOs in order to clarify which order type is preferable and why.Day ISO and Hide and Light Orders3m 22s
Need for Hide and Light Orders5m
Order Priority5m
ISO and Day ISO5m
Need for Day ISOs5m
Benefits of Day ISO5m
Additional Reading on Hide and Light Orders2m
- Dark PoolsDark pools cover a substantial amount of transaction volumes. Therefore, it’s crucial for us to learn about this market. After completing this section, you will be able to define dark pools and explain their uses. You will also learn how market participants often abuse the system of dark pools and how you, as a trader, can avoid falling victim to such practices.Use of Dark Pools2m
Benefits of Dark Pools5m
Dark Pool Orders5m
Prices in Dark Pools5m
NBBO and Dark Pool Liquidity5m
Abuse of Dark Pools2m
Midpoint Manipulation5m
Order Execution5m
Sub-Penny Trading5m
Toxic Dark Pools5m
Avoiding Toxic Dark Pool2m
Measuring Adverse Selection5m
Toxic Dark Pools5m
Practices to Avoid Toxic Dark Pools5m
Additional Reading on Dark Pools2m
Test on IOCs, ISOs, Hide-and-Light, and Dark Pools14m
- Physics of MFTWhat kind of infrastructure is needed to reduce the latency to 10 milliseconds? This section will cover three important things you will need to reduce the latency of your trading system.Physics of MFT2m 58s
Colocation5m
Extranet5m
ITCH Feed5m
Virtual Private Server5m
Advantage of ITCH Feed5m
Live Trading Platforms2m
- Backtesting an MFT StrategyThis section explains the limitations of backtesting an MFT strategy. It also covers different aspects that an MFT trader should keep in mind while choosing a backtesting platform.Backtesting an MFT Strategy3m 2s
Purpose of Backtesting5m
Order Execution Model5m
Adverse Selection5m
Backtest Gaming Strategies5m
Choosing a Backtesting Platform3m 54s
Language for Backtesting5m
Scripting Language5m
Special-Purpose Platforms5m
API5m
Backtesting Strategies5m
FAQs on Choosing a Backtesting Platform2m
- Historical Tick DataWhat are the different kinds of tick data? Where can you find the tick data for backtesting an MFT strategy? This section answers these questions by explaining the different kinds of tick data and discussing different sources for purchasing/renting historical data for backtesting an MFT strategy.Historical Tick Data5m 7s
Types of Tick Data5m
Timestamp5m
Calendar Spread Data5m
Order Book Data5m
Data in Tape Format5m
Choosing a Data Vendor5m
Additional Reading on Tick Data Vendors2m
FAQs on Historical Tick Data2m
Test on Backtesting, Historical Tick Data14m
- Order Flow BasicsIn this section, you will learn the basics of order flow. This section also explains how order flow is used as an indicator.Basics of Order Flow2m 8s
Definition of Order Flow?5m
Typical Structure of Order Flow Data5m
Order Flow and Transaction Volume5m
Calculate the Order Flow5m
Order Flow as an Indicator5m 9s
Order Flow Indicator5m
Most Common Data Available5m
Limitation of Ticker Tape Data5m
ITCH Feed Data5m
Aggressor Flag5m
Best Order Flow Information5m
Additional Reading for Order Flow Basics2m
FAQs on Order Flow2m
- Calculate the Order FlowThis section explains the challenge of accurate order flow calculation. This section also discusses the tick rule and how to calculate order flow using the tick rule.The Challenge of Accurate Order Flow Calculation2m
Aggressive Traders5m
Passive Traders5m
Order Flow Calculation Accuracy5m
Co-location for Order Flow Calculation Accuracy5m
Advantage of Using ITCH Data5m
Computing the Order Flow: Tick Rule2m
Order Flow of Buy Market Order5m
Basics of Tick Rule5m
Order Flow of Sell Market Order5m
Find the Order Flow Sign5m
Method to Calculate the Order Flow5m
Tick Rule for Order Flow Calculation5m
Calculate the Tick Direction5m
Ticks with Undefined Trade Direction5m
Calculate the Order Flow5m
Additional Reading for Order Flow Calculation2m
Test on Basics and Calculation of the Order Flow10m
- Quote Rule and Lee-Ready Algorithm for Order FlowThis section discusses the quote rule and Lee-Ready Algorithm for order flow calculation. You will learn to implement the quote rule and Lee-Ready algorithm in Python.Quote Rule and Lee-Ready Algorithm4m 21s
Quote Rule for Computing Order Flow5m
Buy Market Order5m
Quote Rule for a Trade Above the Midpoint5m
Drawback of the Quote Rule5m
Lee-Ready Algorithm5m
Lee-Ready Algorithm for Trades at the Midpoint5m
Apply Quote Rule and Lee-Ready Algorithm5m
Calculate the Midpoint5m
Calculate the Trade Direction Using Quote Rule5m
Additional Reading for Quote Rule and Lee Ready Algorithm2m
- Bulk Volume ClassificationThis section discusses Bulk Volume Classification (BVC) for order flow calculation. You will learn to implement the BVC method in Python.Bulk Volume Classification2m
Calculate Order Flow Using Bulk Volume Classification5m
Data for Bulk Volume Classification5m
Time Bars and Volume Bars5m
Buy Volume5m
Order Flow5m
Calculate Time and Volume Bars5m
Calculate the Volume Bars from Tick Data5m
Bulk Volume Classification with Time Bars2m
Gaussian CDF of Z-Score5m
Calculate the Z-score of Price Change5m
Bulk Volume Classification with Volume Bars2m
Standard Deviation in the BVC Method5m
Order Flow for Volume Bars5m
Buy Volume for Volume Bars5m
Calculate Order Flow with BVC5m
Calculate the Order Flow Using The BVC Method5m
- Trade the Order FlowIn this section, you will learn to create trading strategies using the order flow. You will also create a strategy using the tick rule and backtest the strategy.Trading the Order Flow2m
Positive Order Flow5m
Negative Order Flow5m
Need for Order Flow Analysis5m
Percentile-Based Order Flow Strategy5m
Backtest The Order Flow Strategy5m
Test on Calculating and Trading the Order Flow14m
FAQ on Methods to Compute the Order Flow2m
- Capstone ProjectIn this section, you will undertake a capstone project. This project will require you to apply and practice the concepts learnt throughout this course.Capstone Project: Getting Started2m
Problem Statement2m
Code Template and Data Files2m
Capstone Project Model Solution5m
Capstone Solution Downloadable2m
- Paper and Live TradingTo make sure that you can use your learning from the course in the live markets, a live trading template has been created which can be used to paper trade and analyse its performance. This template can be used as a starting point to create your very own unique trading strategy.Steps to Set Up Alpaca Account and Get API Keys2m
Template Code File2m
Reducing the Latency2m
- Run Codes Locally on Your MachineIn this section, you will learn to install the Python environment on your local machine. You will also learn about some common problems while installing python and how to troubleshoot them.Uninterrupted Learning Journey with Quantra2m
Python Installation Overview1m 59s
Flow Diagram10m
Install Anaconda on Windows10m
Install Anaconda on Mac10m
Know your Current Environment2m
Troubleshooting Anaconda Installation Problems10m
Creating a Python Environment10m
Changing Environments2m
Quantra Environment2m
Troubleshooting Tips for Setting Up Environment10m
How to Run Files in Downloadable Section?10m
Troubleshooting for Running Files in Downloadable Section10m
- SummaryIn this section, we will summarise everything you have learned in this course.Course Summary5m 3s
Course Summary and Next Steps2m
Python Codes and Data2m
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about author
Dr. Ernest P. Chan
Dr. Ernest Chan is the Managing Member of QTS Capital Management, LLC., a commodity pool operator and trading advisor. QTS manages a hedge fund as well as individual accounts. He has worked in IBM human language technologies group where he developed natural language processing system which was ranked 7th globally in the defense advanced research project competition. He also worked with Morgan Stanley’s Artificial intelligence and data mining group where he developed trading strategies.
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Faqs
- When will I have access to the course content, including videos and strategies?
You will gain access to the entire course content including videos and strategies, as soon as you complete the payment and successfully enroll in the course.
- Will I get a certificate at the completion of the course?
Yes, you will be awarded with a certification from QuantInsti after successfully completing the online learning units.
- Are there any webinars, live or classroom sessions available in the course?
No, there are no live or classroom sessions in the course. You can ask your queries on community and get responses from fellow learners and faculty members.
- Is there any support available after I purchase the course?
Yes, you can ask your queries related to the course on the community: https://quantra.quantinsti.com/community
- What are the system requirements to do this course?
Fast-speed internet connection and a browser application are required for this course. For best experience, use Chrome.
- What is the admission criteria?
There is no admission criterion. You are recommended to go through the prerequisites section and be aware of skill sets gained and required to learn most from the course.
- Is there a refund available?
We respect your time, and hence, we offer concise but effective short-term courses created under professional guidance. We try to offer the most value within the shortest time. There are a few courses on Quantra which are free of cost. Please check the price of the course before enrolling in it. Once a purchase is made, we offer complete course content. For paid courses, we follow a 'no refund' policy.
- Is the course downloadable?
Some of the course material is downloadable such as Python notebooks with strategy codes. We also guide you how to use these codes on your own system to practice further.
- Can the python strategies provided in the course be immediately used for trading?
We focus on teaching these quantitative and machine learning techniques and how learners can use them for developing their own strategies. You may or may not be able to directly use them in your own system. Please do note that we are not advising or offering any trading/investment services. The strategies are used for learning & understanding purposes and we don't take any responsibility for the performance or any profit or losses that using these techniques results in.
- I want to develop my own algorithmic trading strategy. Can I use a Quantra course notebook for the same?
Quantra environment is a zero-installation solution to get beginners to start off with coding in Python. While learning you won't have to download or install anything! However, if you wish to later implement the learning on your system, you can definitely do that. All the notebooks in the Quantra portal are available for download at the end of each course and they can be run in the local system just the same as they run in the portal. The user can modify/tweak/rework all such code files as per his need. We encourage you to implement different concepts learnt from different learning tracks into your trading strategy to make it more suited to the real-world scenario.
- If I plug in the Quantra code to my trading system, am I sure to make money?
No. We provide you guidance on how to create strategy using different techniques and indicators, but no strategy is plug and play. A lot of effort is required to backtest any strategy, after which we fine-tune the strategy parameters and see the performance on paper trading before we finally implement the live execution of trades.
- What does "lifetime access" mean?
Lifetime access means that once you enroll in the course, you will have unlimited access to all course materials, including videos, resources, readings, and other learning materials for as long as the course remains available online. There are no time limits or expiration dates on your access, allowing you to learn at your own pace and revisit the content whenever you need it, even after you've completed the course. It's important to note that "lifetime" refers to the lifetime of the course itself—if the platform or course is discontinued for any reason, we will inform you in advance. This will allow you enough time to download or access any course materials you need for future use.
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