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1/ Cool to see people trying market making and documenting the progress in public!
Usually it's an opaque space and hard to learn from others. Most professionals want to protect their alpha at all costs.
Here's my advice on dealing with these practical issues 🧵
Usually it's an opaque space and hard to learn from others. Most professionals want to protect their alpha at all costs.
Here's my advice on dealing with these practical issues 🧵
https://twitter.com/pedma7/status/1674849705824485392
2/ First of all in HFT there are "strict" problems that you must get right and "loose" problems that you just want to 80/20 at the beginning.
More problems than you think will fall into the second bucket.
Problems will migrate to the first bucket, but slower than you think.
More problems than you think will fall into the second bucket.
Problems will migrate to the first bucket, but slower than you think.
3/ When getting started, only model, strategy, and latency should be part of the first problem class.
Some important sounding things that I would recommend the 80/20 principle on:
1) inventory management
2) sizing
3) hedging
I.e. almost all of the issues @pedma7 mentioned
Some important sounding things that I would recommend the 80/20 principle on:
1) inventory management
2) sizing
3) hedging
I.e. almost all of the issues @pedma7 mentioned
4/ Starting with inventory management:
1. Query your positions periodically.
2. Listen to fill feed or order/cancel responses.
3. When your position changed, don't bother figuring out by how much. Instead, fade your top of book orders and don't take until you re-query.
1. Query your positions periodically.
2. Listen to fill feed or order/cancel responses.
3. When your position changed, don't bother figuring out by how much. Instead, fade your top of book orders and don't take until you re-query.
5/ Sounds hacky, but a low volume HFT strategy running with this system will get almost all the good volume compared to running with drop-copy and real time position reconciliation.
The volume you miss with this setup will be the more marginal fills anyway.
The volume you miss with this setup will be the more marginal fills anyway.
6/ With market moves and hedging, just ignore it. Keep a small position limit, and bias towards flattening.
Again, if you truly have short term alpha, your expected pnl will not suffer from this adjustment.
Compute markouts to determine if you have edge.
Again, if you truly have short term alpha, your expected pnl will not suffer from this adjustment.
Compute markouts to determine if you have edge.
7/ Once your strategy matures and you decide to productionize it, these issues slowly migrate towards things you must get "exactly right."
But when starting out the proper implementation will bog you down and not contribute to the sign of your pnl.
But when starting out the proper implementation will bog you down and not contribute to the sign of your pnl.
8/ Hope this is helpful for people starting out in HFT.
For a concrete example, here is an open source end-to-end liquidity provision strategy:
As you can see, it's very simple to get a template up and running to plug in your strategy logicgithub.com/hyperliquid-de…
For a concrete example, here is an open source end-to-end liquidity provision strategy:
As you can see, it's very simple to get a template up and running to plug in your strategy logicgithub.com/hyperliquid-de…
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