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 are 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 at multiple levels, a corresponding framework is required. None of the publicly available high-frequency trading frameworks considers multi-level joint trading, which makes 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 become a better choice when we improve the order execution strategies). To achieve overall good performance, it is necessary to consider the interaction of strategies at a different levels.
Therefore, building a new framework for trading on multiple levels becomes necessary to solve the various problems mentioned above, for which we designed a nested decision execution framework that considers 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
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 the 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 the 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 the trading algorithm.
The optimization for the nested decision execution framework can be implemented with the support of QlibRL. To know more about how to use the QlibRL, go to API Reference: RL API.
An example of a nested decision execution framework for high-frequency can be found here.
Besides, the above examples, here are some other related works about high-frequency trading in Qlib.
- Prediction with high-frequency data
- Examples to extract features from high-frequency data without fixed frequency.
- A paper for high-frequency trading.