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How to High Frequency Trade

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HEDGE FUND IN A BOX
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"Fresh out of college, with no background in finance, I learned high frequency trading (HFT) first hand while bootstrapping my startup from nothing to trading tens of millions of shares daily for a billion-dollar hedge fund," writes WK Selph, self-described as "an experienced quant," on the new, just-started-over-the-weekend "WK's High Frequency Trading How To" blog.


Fortunately, or perhaps for us bloggers rather unfortunately, starting a blog requires far less ambition or effort than starting a HFT firm. This is clear from the blog's second post when Selph warns, "The nature of high frequency trading is such that it is critical to be able to rapidly iterate to adapt models to market conditions. If a trading system has what is truly model logic strewn throughout, it can become a nightmare to modify model behavior." Uh, right. Umm, because only a fool would build a HFT system with model logic strewn throughout, hahaha. Ahem.

Today's post, the blog's third, is "How to Build a Fast Limit Order Book," which is no doubt search engine optimized to capture the rising Google Trends keyword search "What is a fast limit order book," rising because I just typed that into the Google search bar since I have no idea what a "fast limit order book is." This post really highlights how much I have to learn about high frequency trading because a limit order book is apparently "the single most important component of a trading system," which, obviously, I did not know because until a few minutes ago I didn't even know what a limit order book is! Also, did you know that "if you store the Limits in a sparse array and linked together in a list then adds become O(log M) again while deletes/executions stay O(1)?" I mean, come on! This is HFT 701, pal! The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It's bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you're not naive enough to think we're living in a democracy, are you buddy? It's the free market. And you're a part of it. You've got that killer instinct. Stick around pal, I've still got a lot to teach you.

Okay, it's true, the last half of that entire paragraph I just cut and pasted from the 1987 movie Wall Street quotes I found on IMDB. I really have no idea what all that stuff means either. But it sure seems quaint compared to this new-fangled HFT stuff!
POSITION:  No positions in stocks mentioned.

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