Summary

In this chapter, we learned about the key terms and concepts of systematic and algo trading. We familiarized ourselves with alpha and beta as risk metrics in investment and at the same time, as different methods for profit generation in algo trading. We considered a few popular alpha-generating trading strategies and learned about their advantages, shortcomings, and associated risks. We also touched on the complex domain of options trading as the primary method to earn on market beta and gave a quick look at other trading strategies, such as arbitrage and stat arb, market-making, and HFT.

Now that we know the conditions under which a certain strategy may enter or exit the market, the last obstacle on our way to a first trading application is the mechanism that generates orders according to the strategy rules, sends them to the market, and controls their execution. Recalling the analogy at the beginning of this chapter, now we have added the brains to our trading app, and...