Topic · Trading & Microstructure
← All topicsExecution Algorithms
29 articles · 5 checkpoints · 17 deeper reads · 7 reference notes
Every article, in reading order
plant a flag as you finish eachRead these first
The same trade can be scored as a 22 bps loss or a 40 bps win depending on what you compare it to. Picking the benchmark is not a reporting decision, it is an instruction to the algo about what to optimise.
Every child order you send is evidence. If your slices are the same size, on the same venue, at the same cadence, other people work out what you are doing and the price moves before you get there. Leakage is the part of your cost that never comes back.
Every order is a trade-off between paying the spread now for a guaranteed fill (aggressive) and waiting in the queue for a better price that might never come (passive). The right choice depends on urgency and how likely you are to actually get filled.
You cannot backtest an execution algorithm the way you backtest a signal, your own order changes the very book you're trading against. Simulating execution means modelling queue position, fill probability, and impact, not just replaying historical prices.
Trading depresses the price, and then the book heals, new liquidity slowly refills the levels you just ate. Obizhaeva-Wang models that healing explicitly, which is what lets it say something Almgren-Chriss can't: trading fast and then pausing is different from trading slowly and steadily.
Then the rest