First step in developing high-frequency trading models

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Journal Article

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Vanstone, B., & Hahn, T. (2015). First step in developing high-frequency trading models. The Journal of Trading, 10 (2), 54-71.

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© Copyright, Institutional Investor LLC, 2015




Confirmation of stylized facts and dimension reduction are key first steps in the subsequent development of specific high-frequency trading rules. This article demonstrates the application of these techniques using high-frequency foreign exchange (FX) data as a case study. The FX spot markets are well suited to high-frequency speculative trading. They are highly liquid, leveraged, and trade 24 hours a day, five days a week. This article describes the processes to follow for determining the applicability and robustness of known or suspected stylized facts to speculative trading; it also formalizes the technique of dimension reduction in high-frequency financial datasets.

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