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The Trading Mesh

#Commodities and #HFT – so happy together

Fri, 30 Mar 2012 10:44:16 GMT           

 

A positive correlation between commodities and other asset classes makes itself known in the high frequency trading world.

 

Read the original article here

 

A positive correlation between commodities and other asset classes makes itself known in the high frequency trading world. It’s important for investors and traders to stay up to date on the market – what works, what doesn’t, and where there’s a profit to be made.

 

Lately, it has been noted that there is without question a direct relationship between the price of commodities (especially oil) and that of other asset classes – for example currencies, equities, and bonds. Experts have been finding correlations that occur during time periods as short as one second. This development shows a higher potential for use of algorithmic trading strategies, and as a result high frequency trading has become more relevant in the commodities market than ever before.

 

According to a paper written by David Bicchetti and Nicolas Maystre,“Before 2008, high-frequency co-movements between commodity and equity markets did not usually differ from zero over a long-lasting period at such high frequencies…in the course of 2008, these correlations departed from zero and became strongly positive after the collapse of Lehman Brothers."

 

With this development, there has been some anger amongst some of the more "traditional" traders, who accuse the high frequency folk of leeching off the market without contributing anything. Can’t win ‘em all.

 

Either way, having the most current trading technology is becoming exponentially more important in a world where a fraction of a second can make a difference as to how much money you make…or lose.

 

Read the original article here

 

Involved in the high frequency trading market? Check out our High Frequency Trading World Chicago event, taking place June 25-27.

 

 

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