A Multi-Exchange Lead-Lag Signal for Crypto High-Frequency Trading
Summary
The document describes a high-frequency trading approach that looks for short-term lead-lag relationships among cryptocurrency exchanges. It compares midpoint prices from several venues, measures each venue’s move against its previous observation using a threshold, and combines the resulting upward and downward signals. A positive aggregate triggers a buy on the target exchange; a negative aggregate triggers a sell. The implementation also cancels previous orders before placing a new one and includes settings for order size, price adjustment, and polling interval.
The article says the source strategy once performed well but is no longer usable as presented. It attributes deterioration to competing strategies synchronizing prices, fee changes, exchange limits and latency improvements, slippage, liquidity, and changing volatility. It offers no controlled performance evidence or current profitability estimate. The described method depends on timely and reliable order-book data, and the code’s simplified structure does not establish safeguards against stale or invalid prices, partial fills, or directional losses.
Key ideas
- The signal compares midpoint price changes across several exchanges using a threshold.
- Upward and downward venue signals are combined to choose a direction on the target venue.
- The implementation cancels tracked orders before placing a replacement order.
- Competition, fees, latency, slippage, and liquidity can erode lead-lag opportunities.
- The article presents the strategy as outdated and does not demonstrate current profitability.
- Reliable data and controls for execution and directional exposure are essential considerations.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.