High-Frequency Technical Trading: The Importance of Speed
Martin Scholtus () and
Dick van Dijk ()
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Martin Scholtus: Erasmus University Rotterdam
No 12-018/4, Tinbergen Institute Discussion Papers from Tinbergen Institute
This paper investigates the importance of speed for technical trading rule performance for three highly liquid ETFs listed on NASDAQ over the period January 6, 2009 up to September 30, 2009. In addition we examine the characteristics of market activity over the day and within subperiods corresponding to hours, minutes, and seconds. Speed has a clear impact on the return of technical trading rules. For strategies that yield a positive return when they experience no delay, a delay of 200 milliseconds is enough to lower performance significantly. On low volatility days this is already the case for delays larger than 50 milliseconds. In addition, the importance of speed for trading rule performance increases over time. Market activity follows a U-shape over the day with a spike at 10:00AM due to macroeconomic announcements and is characterized by periodic activity within the day, hour, minute, and second.
Keywords: Technical Trading; High-Frequency Trading; Latency Costs; Trading Speed; Market Activity (search for similar items in EconPapers)
JEL-codes: G10 G14 G20 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20120018
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