Hacker News Reader

Comment by mdwrigh2 | Hacker News Reader

Do you have any suggestions on where to start reading on Algorithmic Trading? Perhaps also a way that I could test algorithms against the market, without actually risking any money?

View on HN

The Encyclopedia of Trading Strategies by Jeffery Owen is good. My own experience suggests it is extremely difficult to find exploitable inefficiencies by looking at market data alone [I have not managed to do so and have spent a lot of time attempting to do so] and you're more likely to succeed making something useful people want!

You can buy historical 'tick data'. Be forewarned, however, that simulations run on this kind of data are not the same as real trading since it doesn't reflect the bid/ask. Also in my opinion and experience, price alone is insufficient data for analysis. Also don't forget to figure in total execution cost as it makes a huge difference in the evaluation of algorithms, not to mention the 'bank roll' necessary to allow any 'edge' to play out. Trading simulations are an engaging software problem, but they aren't such a great approximation of actual trading, at least in my experience.

You can also download daily tick data from Yahoo Finance for free, They offer bid/ask, volume, and adjusted closes.

"Tick data" refers to trade by trade execution data. Daily data is end of day summary data. If you are doing HFT, you need tick data and the market depth. Huge volumes of data compared to daily close data.

Aye, Tick data is needed for HFT, no doubt there. I was actually talking towards this thread which mentioned that they should try algorithmic trading first. Which you can build a successful system around daily closes, as long as you plan to hold your equity for over a 24hr period.

For serious HFT development you need to have order book data too. This costs.

You can easily test in virtual markets.

Optionshouse has a nice one that has a XML ajax interface.

VSE from marketwatch is a bit older but can also be done.

I've wrote APIs for both.

Reply on news.ycombinator.com