Design of Nested Decision Execution Framework for High-Frequency Trading


Daily trading (e.g. portfolio management) and intraday trading (e.g. orders execution) are two hot topics in Quant investment and usually studied separately.

To get the join trading performance of daily and intraday trading, they must interact with each other and run backtest jointly. In order to support the joint backtest strategies in multiple levels, a corresponding framework is required. None of the publicly available high-frequency trading frameworks considers multi-level joint trading, which make the backtesting aforementioned inaccurate.

Besides backtesting, the optimization of strategies from different levels is not standalone and can be affected by each other. For example, the best portfolio management strategy may change with the performance of order executions(e.g. a portfolio with higher turnover may becomes a better choice when we improve the order execution strategies). To achieve the overall good performance , it is necessary to consider the interaction of strategies in different level.

Therefore, building a new framework for trading in multiple levels becomes necessary to solve the various problems mentioned above, for which we designed a nested decision execution framework that consider the interaction of strategies.


The design of the framework is shown in the yellow part in the middle of the figure above. Each level consists of Trading Agent and Execution Env. Trading Agent has its own data processing module (Information Extractor), forecasting module (Forecast Model) and decision generator (Decision Generator). The trading algorithm generates the decisions by the Decision Generator based on the forecast signals output by the Forecast Module, and the decisions generated by the trading algorithm are passed to the Execution Env, which returns the execution results.

The frequency of trading algorithm, decision content and execution environment can be customized by users (e.g. intraday trading, daily-frequency trading, weekly-frequency trading), and the execution environment can be nested with finer-grained trading algorithm and execution environment inside (i.e. sub-workflow in the figure, e.g. daily-frequency orders can be turned into finer-grained decisions by splitting orders within the day). The flexibility of nested decision execution framework makes it easy for users to explore the effects of combining different levels of trading strategies and break down the optimization barriers between different levels of trading algorithm.


An example of nested decision execution framework for high-frequency can be found here.

Besides, the above examples, here are some other related work about high-frequency trading in Qlib.