Hi everyone, I have developed some automated strategies that I'm executing manually to get a feel of how to code the execution logic. When spreads are $0.01, I usually send market orders. However for some smaller cap stocks or where bid ask spread is bigger, I usually try to enter limit orders. Is there any reference for how to develop execution algos, somewhat similar to what IB has? Is there a way to delegate to IB API the order execution and is it better to do it this way?
I'm not familiar with IB, but it seems reasonable to send IOC orders instead of market orders. Shoot at the price you want, and you wont risk slipping if the market moves away.
Do you know that the IB API (in 4-5 major Language flavors) is available to you for free? Do you know that "The IB Marketplace" is available to anyone, IB account-holder or not, to search for (for example) someone to code an algorithym for them? Lastly, as the saying goes: Google Is Your Friend.
"THEY'LL STEAL ALL YOUR PROFITS, BY CODING THEIRS TO BE FASTER, AND PUTTING ALL THEIR CAPITAL ON YOUR GOLDEN NUGGET!!!" Jeez, man. Get outside.
Its a matter of principal Tom, them using your algorithm and intellectual property is not part of the transaction and there's a signifcant conflict of interest. The developer has no interest in you achieving the best possible result, their interest lies with using your IP to develop the best possible algorithm for themselves. If you don't have a problem with that then by all means, go for your life.
You are living in a mythical world of unicorns that carry secret and unique rainbow-farting algorithms up their butts, and where developers (apparently) wear skinny mustaches and black capes. A developer is in business because they deal in the real world, where workable algos are a dime-a-dozen (and carry a freshness date), and their personal capital is between their ears, and they leverage that capital through successful clients who seek follow-up and promote them via word-of-mouth. THAT'S real life. Jus' sayin'.
The alpha model is not under consideration here. Instead I'm trying to learn more about execution algos and determining if it is necessary to code 1 for myself. Will hope to see some samples of simpler exe algo and how they work.
I would definitely recommend coding it yourself. What you noted (bid-ask spread as a function of capitalization) is likely an anomaly on that contract, and may disappear *tomorrow*, and you'd want to be all inside that code to be responsive to what you see in the future, in that and in other markets. OR, find yourself a dev who digs repeat business.[!!]
Not so ... rumours of his death are greatly exaggerated: he's still very much alive and kicking at the age of 82 (I'm not sure whom he's kicking, though ...).