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Algorithmic Trading: IMPROVE
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IMPROVE:
Improve, our implementation shortfall strategy,
seeks to achieve the user's desired tradeoff between market
impact and opportunity costs, given a user-specified duration
and any of three mode settings - Passive, Active, and Aggressive.
The server will complete the order or return unexecuted shares
after the duration has expired. The strategy attempts to trade
an order based on the price of the stock when the order arrived
on the server (the "arrival price"). The user may
also provide a "price tolerance" indicating how much
a stock's price will be allowed to deviate from its arrival
price before the server will stop trying to execute the order.
If no tolerance price is set by the user, the server will set
the price tolerance to a percentage difference from the arrival
price.
Price Mode Settings
Passive: Passive weights minimizing market
impact over order completion. The setting will trade passively
by posting strategically priced limit orders if the current
price is at or better than the arrival price.
Active: The Active setting seeks the best tradeoff between minimizing market impact and minimizing opportunity cost. If the price lies between the arrival price and its price tolerance, the strategy will trade the order opportunistically. If the price is better than the arrival price, the strategy will trade aggressively; if worse than the tolerance price, the strategy will not trade.
Aggressive: The Aggressive setting weights
order completion over market impact. If the order is a buy (or
sell), the strategy lifts offers (or hits bids)—up to
the order's tolerance price. If the price lies outside the order's
price tolerance, the strategy pauses until the price comes within
range.
Advantages
The Improve server adds a level of sophistication to any trading desk by enabling traders to take advantage of anticipated market moves. If the market were in an uptrend, for example, a user might want to send buy orders at an Aggressive setting to take advantage of lower current prices and send sell orders at a Passive setting to take advantage of higher prices as the market rises. A user with no prediction of the market direction may use an Active setting, causing the server to trade actively in a range from the arrival price to a server-assigned percentage of difference from the arrival price.
For more information please contact your Account
Manager, Customer Support:
866-665-4454, or sales@futuretrade.com.
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