Intraday Trading Flashcards

1
Q

What is the motivation behind intraday trading

A

Intraday price ranges tend to be wider than open-close ranges. Intraday captures more volatility. Especially profitable on highly volatile days.

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2
Q

Explain the main issue regarding microstructure of markets

A

Assets have multiple prices: bid, trade ask.

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3
Q

Name the 2 different types of orders

A

Limit orders and market orders

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4
Q

What is a limit order

A

An order that guarantees price but not execution

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5
Q

What is a market order

A

An order that guarantees execution but not price

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6
Q

Name factors that affect bid-ask spreads

A

Liquidity, market conditions, asset value and ticket size

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7
Q

What is the bid-ask bounce?

A

As orders arrive, the price bounces between the bid and the ask, creating fake volatility, and the illusion of mean-reversion

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8
Q

Main issues with intraday strategy development:

A

Assets have multiple prices: bid, trade, ask
Different types of orders: LMT and MKT
Timebar: Open/Close/High/Low
Frequency: 1m/10m/1h

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9
Q

Name strategies that can be applied intraday

A

Mean reversion, TF, Patterns, Event Trading, ML

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10
Q

Keep in mind regarding intraday:

A

Information Lags
Define entry/exit rules accurately
Use LMT and not MKT orders, to avoid large bid-ask spreads
Explicit costs (brokerage) and implicit costs (bid/ask and bounce) can break strategies

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11
Q

Can one price per minute be enough for intraday trading?

A

It can, but can be better to use highs and lows

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12
Q

Historical evolution of intraday

A

Are becoming as crowded as day trading strategies. Best executed by machines.

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