Research On Comprehensive Algorithmic Trading Strategies Based On China’s Stock Index Futures Market

A useful strategy is a good way to control the risk and build portfolio for every trader in the financial markets. So, around the world, how to build a useful strategy is a main problem, and now, algorithmic trading is a popular way for traders.In2010, there is a new start in Chinese market, not only for CSI300index futures, but also for algorithmic trading in China. On one hand, the basic theory of algorithmic trading is not yet mature. And on the other hand, there only have a few software can support algorithmic trading. So, it’s the time which may be a great chance for algorithmic trading strategy.Based on the improved static VWAP strategy and combining statistical arbitrage trading strategy to build the portfolio model, this paper through the market practice and the research method of combining the theory study to integrate algorithm trading strategy.The thesis mainly includes three parts. One is Methods review, one is theory and the other one is empirical studies. Respectively, it has introduced the development of market strategies and algorithms, analysis method and the consideration of many kinds of strategies, the main method of strategy theory, and data selection with empirical analysis.The first part is the background of the development of algorithmic trading strategy, the main types of trading strategy development process and introduces the current situation of the development of trading strategies. First, it summarizes the historical background and the meaning of the algorithmic trading strategy and framework of this paper. The emergence of algorithmic trading strategy and development is the need to keep up with the requirements of the times and development. Its basic function includes the lower transaction costs, trading goals, market impact reducing, weaken the transaction risks and capture opportunities, etc. It also can be simply summarized as arbitrage, risk control and price discovery. And algorithmic trading strategy in active and passive algorithmic trading strategy made a detailed summary and analysis, introduces the origin and development of algorithmic trading strategies. Trading strategies in the current market are used to do a more detailed analysis and classified. And the related research which at home and abroad were summarized. At the same time, the paper also analyzes VWAP strategy and the thinking method of statistical arbitrage strategy.The second part is the analysis of comprehensive algorithmic trading strategy’s basic theory. The trading strategies based on active algorithm combined with passive algorithm trading strategies. With its reasonable structure, both price discovery and cost control can be taken into account. In standard VWAP strategy with the use of mathematical deduction, traders could find better static intraday volume forecast model. And it combined with the statistical arbitrage models. The duration of the contract for the deal carries on the analysis forecast, select trading positions and data sequence point in time, and through the theoretical model in constraint conditions to get the corresponding comprehensive trading strategies by the co-integration test, the weighted moving average model and exponential weighted moving average model.The third part is in constructing a reasonable comprehensive algorithm trading strategy which selection is on the basis of historical data for empirical research. The article selecting CSI300stock index futures’ month and monthly contracts as a trade mark. It chooses continuous historical data as the research object. First of all, do co-integration test, the paper finds the relation between proportion of trading positions, according to the variance of price fluctuation characteristics, with the weighted moving average model’s predictive results of the average trading price. And considering the balance of the accuracy and efficiency, it selects exponential weighted moving average model to get the prediction results of the variance. On this basis, according to the market conditions, the rules and the characteristics of the individual traders, the article makes trading rules, and so it find the deal with right time positions, establish a price discovery strategy. Then according to the optimization of static VWAP trading strategy model, we forecast the intraday trading volume, through comprehensive trading strategy makes an empirical analysis with historical data. In accordance with the rules of sample set and test set trading analysis, the results showed that the two test set comprehensive strategy can obtain a more considerable income, and trading strategy has good stability and can be applied to the stock index futures market well. At last, according to the results, this article evaluates the effect of the comprehensive algorithmic trading strategies, and gives some suggestions for the optimization of the next step.