Order Filling and HFT Simulation

The Fill variable supports several modes for simulating naive or realistic order filling, as well as a HFT simulation mode. HFT (High Frequency Trading) is a trading method that exploits inefficiencies on the millisecond or microsecond time scale. It is very different to normal algorithmic trading. Usual trading accessories such as candles or indicators, are not used. The deciding factor is speed. HFT systems do not run on a trading platform - even Zorro would be not fast enough - but are either programmed in a high speed language such as C, Pentium assembler, GPU language (HLSL or CUDA), or directly relized in hardware using a FPGA design language like VHDL.

No retail trading platform supports HFT trading, but Zorro can be used for testing HFT systems under different latency conditions. An introduction to HFT testing with Zorro, and an example of a HFT arbitrage system can be found on Financial Hacker. In Fill mode 8, only direct trading, receiving price quotes, and plotting data are supported; indicators, series, or the run function are not used. Use the main function for initializing the system and for looping through bars. The maximum number of bars must be set up with MaxBars. Trades are opened and closed only with enter and exit commands; TMFs, limits, stops or targets are not used in HFT mode. Hedge mode must be 2. Price quotes are entered to the system with the priceQuote function. Any price quote must include the exchange time stamp, since the system is synchronized to it. The two-way latency between exchange and PC location is set up with OrderDelay and determines the price quote at which the enter or exit order will be filled.

For determining the real latency between your system and an exchange, make sure that your PC clock is exactly in sync with the clock used at the exchange, then compare the exchange time stamp of incoming live price quotes with the arrival time stamp. Double this time for getting the roundtrip latency and add the latecy time of your hardware and software that you should know. As a rule of thumb, the time stamp difference is about 1 ms per any 300 km distance to the exchange (light travels at 300.000 km/sec), plus about 1..2 ms additional delay due to signal routing. OrderDelay can be set up with a precision of 1 microsecond. HFT tick data by data vendors has usually a precision of 1 ms.

Fill

Determines how order fills are simulated in [Test] and [Train] mode and how orders entries affect other open trades.

Modes:

0	'Naive' order filling. Trades open or close at the current market price and at their Entry, Stop, or TakeProfit limits, regardless of slippage and intrabar price movement. Accidental 'cheating' - generating unrealistic profits - is possible by modifying stop or profit limits in a TMF. The naive fill mode, in combination with Penalty, can be used for replicating backtest results by other platforms.
1	Realistic order filling (default). Trades open or close at the most recent price quote plus Slippage. If an entry or exit threshold is hit, the position is filled at a price replicating live trading as accurate as possible (see details below). With daily bars, this mode simulates trading right before the market closes.
2	Alternative order filling. Like fill mode 1, but entries and exits will be filled at limit even when the market price is better (see details below). This causes often a slightly more pessimistic backtest.
3	Delayed realistic order filling. Trades do not fill immediately, but wait for the next price quote. With daily bars, this mode simulates trading at the market open price of the next day.
5	Delayed alternative order filling.
8	HFT fill mode. Trades open or close at the priceQuote whose time stamp is most recent to the current time plus OrderDelay. This mode can be used for testing HFT systems at different latencies.

Type:

int

Remarks:

High resolution price data for HFT simulation often has outliers. Use the Outlier variable to filter out extreme prices that can distort the backtest.
Delayed order filling affects trade statistics separately for entering and for filling the order. As long as the order is not filled, it is assumed pending. NumPendingTotal is increased when the order is entered, and NumOpenTotal when it is filled.
Fill modes have no effect on the display of trade start or end points on the chart, which are always placed on the first and last bar of the trade.
Fill prices are normally rounded to the point value of the asset. TR_FRC enables unrounded fill prices.
When Penalty is set, the fill price always is the given threshold plus or minus Penalty, depending on trade direction.

Fill prices by triggering an Entry, Stop, or Takeprofit threshold are determined by the current fill mode, the slippage, penalty, and the open, high, and low prices of the historical bar or tick that hit the price level. If TICKS is not set and thus intrabar ticks are not evaluated, an intrabar order fill is estimated with the following algorithm:

Event	Fill = 0	Fill = 1	Fill = 2
Long Entry stop	Entry	Max of Entry and Open	Max of Entry and Open
Long Entry limit:	Entry	Min of Entry and Open	Entry
Short Entry stop	Entry	Min of Entry and Open	Min of Entry and Open
Short Entry limit:	Entry	Max of Entry and Open	Entry
Long Stop	Stop	Min of Stop and Open	Min of Stop and Open
Long TakeProfit	TakeProfit	Max of TakeProfit and Open	TakeProfit
Short Stop	Stop	Max of Stop and Open	Max of Stop and Open
Short TakeProfit:	TakeProfit	Min of TakeProfit and Open	TakeProfit
Long OrderDelay	Open or Entry	Max of Entry and Midprice	Max of Entry and Midprice
Short OrderDelay	Open or Entry	Min of Entry and Midprice	Min of Entry and Midprice

Example:

function run()
{
  BarPeriod = 1440;
  Fill = 3; // enter trades at next day's open 
  ...
}

HFT simulation framework:

// Simulate a stock trading HFT system

#define LATENCY  2.5   // simulate 2.5 milliseconds latency

typedef struct QUOTE {
  char  Name[24];
  var  Time,Price,Size;
} QUOTE; // Quote struct by the NxCore plugin

int callback(QUOTE *Quote) // called by the plugin
{
  static int Counter = 0; // quote counter
  if(0 == (++Counter % 1000)) { // every 1000 quotes...
    if(!wait(0)) return 0; // check if [Stop] was clicked
  }
    
  asset(Quote->Name+1); // NxCore adds "e" to the asset name
  priceQuote(Quote->Time,Quote->Price);
  ...
// trade algorithm here, generate TradeSignalLong/Short
  ...
  if(!(NumOpenLong+NumPendingLong) && TradeSignalLong) {
    exitShort();
    enterLong();
  } else if(!(NumOpenShort+NumPendingShort) && TradeSignalShort) {
    exitLong();
    enterShort();
  }
  return 1;
}

function main()
{
  if(Broker != "NxCore") {
    quit("Please select NxCore plugin!");
    return;
  }

  StartDate = 20170103;
  EndDate = 20170131;
  LookBack = 0;
  set(LOGFILE);
  assetList("AssetsHFT");
  OrderDelay = LATENCY/1000.;
  Hedge = 2;
  Fill = 8;
  Lots = 1;
  Verbose = 3;

// process the NxCore history tape files, one for each day
  login(1);	// for initilizing the plugin
  int NxDate;
  for(NxDate = StartDate; NxDate = EndDate; NxDate++) {
    string NxHistory = strf("History\\NxTape%8d.nx2",NxDate);
    printf("\nProcessing tape %s..",NxHistory);
    brokerCommand(SET_HISTORY,NxHistory);
    if(!wait(0)) break; // check if [Stop] was clicked
  }
}