From the course: Algorithmic Trading and Finance Models with Python, R, and Stata Essential Training (2019)

Unlock the full course today

Join today to access over 24,200 courses taught by industry experts.

Market making with algos

Market making with algos

From the course: Algorithmic Trading and Finance Models with Python, R, and Stata Essential Training (2019)

Start my 1-month free trial Buy for my team

Market making with algos

“

- [Instructor] One of the two major types of algorithmic trading is what's called market making. Market making, as the name implies, is all about making an effective market. It's about helping to match up buyers and sellers. Computers are really good at this type of repetitive minutiae that helps to markets to function more efficiently. Now, as part of the market, we have two specific types of orders that comes in, offers and bids, often called bid and ask. Essentially, bids just represent individuals who are willing to come in and bid, or buy, a stock, and they put in an order at a specific price. So in this particular example, we have a stock trading for around $113.10. We have one party willing to buy 600 shares at $113.10, another party willing to pay to buy 725 shares, $113.09, and then another party willing to buy 150 shares at $113.08. We have this bids side of the book built up. Higher prices go to the top of the book. Those represent the best possible purchase orders. On the…

Contents