Algorithmic Trading Strategies

Algorithmic Trading

• Utilizes automated and pre-programmed instructions for order execution.
• Accounts for variables like price, timing, and volume.
• Also known as automated trading, black-box trading, or algo-trading

How Algorithmic Trading Operates

• Sends small portions of a larger order to the market.
• Orders are sent at optimal times.
• Parameters are strategy-dependent and user-defined.

Algorithmic Trading Strategies

• Trend Following: Capitalizes on securities with clear directional movement.
• Arbitrage Opportunities: Exploits price differences of identical assets in different markets.
• Index Fund Rebalancing: Aligns portfolio holdings with tracked indexes.
• Mathematical Models: Uses quantitative models and complex calculations.
• Execution Algorithms: Executes large orders efficiently, minimizing market impact.

Advantages of Algorithmic Trading

• Decreases costs and market impact
• Executes trades at the best prices
• Trades are timed correctly and instantly
• Reduces emotional and psychological influences on trading

Disadvantages of Algorithmic Trading

• Requires constant monitoring
• Susceptible to mechanical failure
• Requires algorithm testing and optimization
• Demands extensive back-testing before live deployment

Simple Example of Algorithmic Trading

• Buy 50 shares of TSLA if the 50-day moving average crosses above the 200-day moving average

Chemical Kinetics

• Studies reaction rates, how rates change under varying conditions, & reaction mechanisms.

Reaction Rate

• Change in concentration of a reactant or product with time.
• For the reaction $A \longrightarrow B$, $Rate = -\frac{\Delta[A]}{\Delta t} = \frac{\Delta[B]}{\Delta t} $
• $\Delta[A]$ represents the change in concentration of reactant A.
• $\Delta[B]$ represents the change in concentration of product B.
• $\Delta t$ represents the change in time.

Rate Laws

• Mathematical expressions relating reaction rate to reactant concentrations.
• For the general reaction $ aA + bB \longrightarrow cC + dD$, the rate law is $Rate = k[A]^x[B]^y$
• k equals the rate constant.
• x equals the reaction order with respect to A
• y equals the reaction order with respect to B
• x+y equals the overall reaction order

Factors Affecting Reaction Rates

• Concentration of Reactants: Increasing typically increases the rate.
• Temperature: Increasing usually increases the rate.
• Surface Area: Greater surface area of solids increases the rate,
• Catalysts: They speed up reactions without being consumed.
• Pressure: Increasing pressure in gaseous reactions can increase the rate.

Rate Law vs. Reaction Mechanism Differences

• Rate Law: Describes the relationship between reaction rates and reactant concentrations.
• Reaction Mechanism: Step-by-step sequence of elementary reactions that results in overall reaction.

Elementary Reactions

• Occur in a single step.
• For $ A + B \longrightarrow C$,Rate $= k[A][B]$

Molecularity of a Reaction

• Number of molecules, atoms, or ions involved in the elementary step.
• Unimolecular: One molecule ($A \longrightarrow products$)
• Bimolecular: Two molecules ($A + B \longrightarrow products$)
• Termolecular: Three molecules ($A + B + C \longrightarrow products$)

Rate Determining Step

• The slowest step in a reaction mechanism.

Catalysis

• Substance that speeds up a chemical reaction without being consumed.

Types of Catalysis

• Homogeneous: Catalyst is in the same phase as the reactants.
• Heterogeneous: Catalyst is in a different phase from the reactants.
• Enzyme: Uses biological catalysts (enzymes), usually proteins, for biochemical reactions.

Collision Theory

• For a reaction to occur reactant molecules must collide with sufficient energy and correct orientation.

Transition State Theory

• Reactants form an activated complex, or transition state, when they collide.
• Transition state denotes a short-lived, high-energy intermediary state between reactants and products.

Arrhenius Equation

• Defines the relationship between the rate and temperature: $k = Ae^{-\frac{E_a}{RT}}$
• $k$ equals the rate constant.
• $A$ equals the frequency factor.
• $E_a$ equals the activation energy.
• $R$ equals the gas constant (8.314 J/mol·K).
• $T$ equals the temperature (in Kelvin).

Integrated Rate Laws

• Relates the concentration of reactants to time.

First-Order Reactions

• $Rate = k[A]$
• $[A]_t = [A]_0e^{-kt}$
• $\ln[A]_t = \ln[A]_0 - kt$
• $t_{1/2}=\frac{0.693}{k}$

Second-Order Reactions

• $Rate = k[A]^2$
• $\frac{1}{[A]_t} = \frac{1}{[A]_0} + kt$
• $t_{1/2}=\frac{1}{k[A]_0}$

Zero-Order Reactions

• $Rate = k$
• $[A]_t = [A]_0 - kt$
• $t_{1/2}=\frac{[A]_0}{2k}$
• $[A]_t$ equals the concentration of A at time t.
• $[A]_0$ equals the initial concentration of A.
• k equals the rate constant.
• $t_{1/2}$ equals half-life

Discord Quick Start Guide

• Provides basic steps for joining, setting up a profile, and starting to use Discord.

What is Discord

• Discord is a place where communities and friends can create a home to stay close and have fun via text, voice and video.
• It facilitates talking every day and gathering more often whether you are part of a school club, a gaming group, or group of friends.

Key Steps to Using Discord

• Create an account.
• Join a server.
• Connect to friends.
• Start conversations.
• Share screen.

How to Create an Account

• Can access in a browser or download the app.
• Needs an email address and password.
• Must verify email address after account creation.

How to Join a Server

• After account creation, join a server by clicking the "+" button.
• Allows entering an invite URL or choosing from public servers.

How to Add Friends

• Add friends via username, common server or scan QR code

Username

• Add by clicking the "Add Friend" button, entering their username, and sending a request.

Common Servers

• Right-click their name in a server and select "Add Friend" to send a request..

QR Code Scan

• In the mobile app, scan another person's QR code to add them.

How to Initiate a Conversation

Text Channels

• Allows the sending of texts, file sharing, and link posting by clicking the channel to start writing.
• Use @ to tag members or roles.
• Use # to tag other channels.

Voice Channels

• Enables vocal conversations by clicking to join and clicking "Disconnect" to exit.

Direct Messages

• Signify private conversations between individual users.
• Start by clicking a friend's name.

Screen Sharing Feature

• Share screen by clicking the "Share Screen" button in a voice channel or direct message.
• Requires choosing a window or screen and clicking "Go Live" to start.

Laws of Thermodynamics

Zeroth Law

• If two thermodynamic systems are individually in thermal equilibrium with a third, then they are in thermal equilibrium with each other.

First Law

• Energy's existence can neither be created nor destroyed; it can only change forms.
• In any process, the total energy of the universe remains the same.
• For a thermodynamic cycle the net heat supplied to the system is equal to the net work done by the system.
• Defined using the formula:$\Delta U = Q - W$
• $\Delta U$ stands for the change in internal energy of the system.
• $Q$ stands for the heat added to the system.
• $W$ stands for the work done by the system.

Second Law

• The entropy of an isolated system not in equilibrium will tend to increase over time, approaching a maximum value at equilibrium.
• The total entropy of an isolated system can never decrease over time.
• $\Delta S \geq 0$ where - $\Delta S$ represents the change in entropy of the system

Third Law

• As temperature approaches absolute zero, the entropy of a system approaches a minimum or zero value.
• The entropy of a perfect crystal is zero at absolute zero temperature.
• $S \rightarrow 0$ as $T \rightarrow 0$ where- $S$ represents the entropy of the system and $T$ represents the temperature of the system

Summary Table of Laws

• Zeroth Law: If two systems are in thermal equilibrium with a third, they are in thermal equilibrium with each other.
• First Law: Energy is conserved.
• Second Law: Entropy of an isolated system increases over time.
• Third Law: Entropy of a perfect crystal at absolute zero is zero.