The high speed dark side.

The segment of High Frequency Trading is currently designated as the ultimate technology in systems investments, because of the ability to manage orders directly to book on a high speed.

There is much controversy regarding this technology, either for lack of structure and procedures of software development, causing risk of failure, or the misuse of some participants due to the price manipulation caused by these systems.

FCA, British authority, fined by the 1st time a case of market abuse caused by the misuse of high-frequency systems, due to an abusive practice that uses high speed to send and cancel a high volume of orders in the book, pressing prices artificially.

It's not it, but we say it is, to see, how it would be, if it was!

I heard this definition of simulation when I was an undergraduate student. Because it was funny and intuitive, I found it very interesting to use this term to define simulation.

The great utility and insight behind this definition is the ability to simulate what I wish.

That is, the author of the phrase is not worried about obeying any rules or fixed protocols. Rather, he is concerned to investigate and be flexible.

Managing Trading Systems: An Automation and Control Point of View.

Capital Market Investments are known as being risky process, requiring an adequate Risk Management (see Financial Risk Management , Volatility vs. Risk, HFT Risk ). Trading Systems are not out of this group, but trading systems have a particular element: It´s a systematic approach. Systematic doesn´t means profitable, however means tractable (see Financial Automation and Control: a new age).

When I say tractable, I’m referring to the mathematical model, where all the variables and parameters are disposal, ensure tracking.

On the tracking list could be included:

Trading Systems Improves Market Liquidity

The use of trading systems, in general, is an effective alternative to increase the liquidity of financial markets without, however, raise the speculative risk relatively.

According to a study published in "The Journal of Finance" in February 2011 entitled "Does Algorithmic Trading Improve Liquidity?" Provides a study which argues that the use of trading systems in the U.S. market enhances liquidity and informativeness of orders. In their study estimates that for large stocks in particular, the use of trading systems narrow spreads, reduce adverse selection and reduces the uncovered positions.

Why Quantitative Investment Outperforms?

Quantitative investments use computer systems to send buy and sell orders of financial assets. Are systems, often possessing artificial intelligence and complex econometric models in their algorithms. Its application is widespread in the U.S. market and on a continuous evolution.

Some Assets and Funds are available to perform this type of investment wisely, but there are few institutions that develop this approach with a significant degree of maturity.

The backtesting results of a carefully conducted and practical application of systems is that will provide the idea of their actual behavior, ie, if will provide positive returns or if the system will always lose in the long run. Its advantage is the ability to perform simulations and optimizations, and thereby enable the evolving investment process using a historical database.