1/ Building a crypto HFT system is a challenging and rewarding journey.
A mega-thread covering:
Trading strategies ("what")
The infrastructure and latency optimization ("how")
Exchange selection ("where")
Market dynamics ("who")
What I wish I knew when getting started ๐งต
A mega-thread covering:
Trading strategies ("what")
The infrastructure and latency optimization ("how")
Exchange selection ("where")
Market dynamics ("who")
What I wish I knew when getting started ๐งต
2/ Starting out with the core of the trading system: the strategy itself.
First some general HFT strategy selection advice before specific alpha:
First some general HFT strategy selection advice before specific alpha:
3/ A specific strategy on locked books with maker rebates.
This is a case study in the alpha research process, going from raw data to an idea to a strategy:
This is a case study in the alpha research process, going from raw data to an idea to a strategy:
4/ Once you have a strategy working live, it's often easiest to scale and generalize that edge you've found.
Here's a concrete example: using your own HFT pnl as a medium frequency signal:
Here's a concrete example: using your own HFT pnl as a medium frequency signal:
5/ Crypto HFT is the wild west. Once your strategy makes money, maintaining the system and playing defense becomes critical.
A concrete example is protecting your HFT strategy from spoofers:
A concrete example is protecting your HFT strategy from spoofers:
6/ In the wild west, another source of edge can be trading when others are sleeping at the wheel.
For example, some thoughts on trading new listings:
For example, some thoughts on trading new listings:
7/ Apart from strategy, infrastructure and latency optimizations are essential for a profitable HFT system.
The key here is to question your assumptions and measure, measure, measure.
A concrete example of optimizing latency on OKX:
The key here is to question your assumptions and measure, measure, measure.
A concrete example of optimizing latency on OKX:
8/ Another example: optimizing latency on Coinbase.
These two exchanges are quite different, but notice how the research process is based on the same underlying principles:
These two exchanges are quite different, but notice how the research process is based on the same underlying principles:
9/ Here's an example of the concrete analysis you might do, which applies to any exchange you are optimizing for.
10/ Another important axis of optimization is selecting where to trade.
This is some of the most actionable alpha I can give to newcomers. Focus your research efforts on one venue to start.
This is some of the most actionable alpha I can give to newcomers. Focus your research efforts on one venue to start.
11/ Perhaps the most crucial aspect to exchange selection is to avoid the dishonest ones like the plague.
Because offshore exchanges are light on regulatory requirements, these sketchy exchanges unfortunately grow like cancer.
Just one example:
Because offshore exchanges are light on regulatory requirements, these sketchy exchanges unfortunately grow like cancer.
Just one example:
12/ Zooming out from strategy and infrastructure, your edge is a service you are providing to make markets more efficient.
Therefore it's important to deeply understand market microstructure.
Here's a starter thread for making vs taking:
Therefore it's important to deeply understand market microstructure.
Here's a starter thread for making vs taking:
13/ At a more theoretical level, markets are a system designed for information propagation.
A high level discussion on a mental model that can help with intuition:
A high level discussion on a mental model that can help with intuition:
14/ It's also important to understand the other participants you are trading against. Sometimes you are competing, but often your alpha is someone else's undesired risk.
There is a lot of edge in thinking deeply about what others are doing:
There is a lot of edge in thinking deeply about what others are doing:
15/ That's it for now. Hope it's helpful for people looking to build an HFT system, or for other traders who want to better understand HFT.
I'll periodically add to this thread of threads if people find future content helpful.
I'll periodically add to this thread of threads if people find future content helpful.
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