I'd suggest maybe look at algo trading rather than HF, it's much more accesible to outsiders, plus you can use the algorithms on places like betfair and stand a decent chance of actually making money.
Do you have any suggestions on where to start reading on Algorithmic Trading? Perhaps also a way that I could test algorithms against the market, without actually risking any money?
The Encyclopedia of Trading Strategies by Jeffery Owen is good. My own experience suggests it is extremely difficult to find exploitable inefficiencies by looking at market data alone [I have not managed to do so and have spent a lot of time attempting to do so] and you're more likely to succeed making something useful people want!
You can buy historical 'tick data'. Be forewarned, however, that simulations run on this kind of data are not the same as real trading since it doesn't reflect the bid/ask. Also in my opinion and experience, price alone is insufficient data for analysis. Also don't forget to figure in total execution cost as it makes a huge difference in the evaluation of algorithms, not to mention the 'bank roll' necessary to allow any 'edge' to play out. Trading simulations are an engaging software problem, but they aren't such a great approximation of actual trading, at least in my experience.
"Tick data" refers to trade by trade execution data. Daily data is end of day summary data. If you are doing HFT, you need tick data and the market depth. Huge volumes of data compared to daily close data.
Aye, Tick data is needed for HFT, no doubt there. I was actually talking towards this thread which mentioned that they should try algorithmic trading first. Which you can build a successful system around daily closes, as long as you plan to hold your equity for over a 24hr period.
what parts of betfair are you suggesting? I am skeptical but intrigued. while profitable gambling is possible I expect the potential returns are much less for respective successful strategies with advantaged gambling also less amenable to extracting any sort of substansively edge giving pattern.
edit: i'm refering to algorithmic trading v gambling not HFT.
Betfair gives you access to the order book and you can get historical data relatively cheaply. Pretty much any liquid market on Betfair will do (in-play sports events tend to be good). Betfair markets to tend to show a lot of the same patterns as "real markets', although obviously there are differences. But it's a decent place to learn the fundamentals.
You're right that potential returns are much higher on real markets, purely because there's far more money traded on real markets. On the other hand entry to "real markets" is much more expensive, Betfair is fairly cheap to enter and don't charge a per-trade commission. Plus there are more market inefficiency on Betfair that don't exist in more developed markets.
If it wouldn't trouble you to do so, could you go into more detail please? Do you have experience with this?
You are saying that any sport event, in particular those that are in play actually have some statistical mineable property with profitably exploitable strategies? If this is the case, with such a low barrier should this not be a game with zero expectation in the long run (maybe negative if there are minimum bet rules)? Whatever distribution that can be learned would have much higher variance than your typical intra day trades no? And while these techniques may be similar in spirit, do the fundamentals map sufficiently? As they say, the devil is in the details. but I speak from ignorance.
I've messed around a little bit with it, but I know some of my quant friends do it more seriously. There's definitely ways of making money of betfair, you even occasionally have arbitrage opportunities across the different markets on betfair.
I think the fundamentals are close enough that it's a useful place to learn. You're not going to be able to take a method that works on Betfair and apply it to a real market, but a lot of the statistical mining/predictions techniques you can use of betfair are exactly the same as those used in real markets.
Betfair isn't just for gambling. You can trade betting positions. In that sense, it's a marketplace amenable to algorithmic trading like any other, entirely without relying on having a gambling advantage.