Empirical Research And Design Of High-Frequency Trading Strategy Based On VPIN

The rapid development of computer technology has accelerated the execution and transmission of electronic order instructions;the regulatory rules of stock trading have been continuously relaxed,which has given rise to more speculative arbitrage in the financial market.Against this backdrop,high-frequency trading emerged.In high-tech markets in Europe and America,high-frequency trading has taken a pivotal position.Due to the adoption of the T+l trading system in most domestic markets,coupled with the restrictions of relevant laws and regulations,the development of high-frequency trading in China lags behind,but with the emergence of stock index futures markets and commodity futures markets,high-frequency trading has begun its rapid development.Whether it is an investor or a government regulator,in the face of massive amounts of information,how to judge market trends and control risks becomes extremely important.We use the non-parametric VPIN model,based on the data of the main contract of CSI 300 stock index futures from March 1,2011 to February 28,2017,calculate the VPIN for different trading baskets within the sample interval to measure the probability of informed trading in different scale intervals.By statistical analysis of the VPIN in the time window of specific historical event,it was found that the VPIN had already begun to rise significantly before the event occurred,and gradually approached the limit value of 1.In order to better observe the predictive effect of VPIN on the future volatility of the market,we introduced the index of realized volatility to analyze,and found that RV and VPIN generally show a relatively obvious increasing relationship under normal circumstances.It shows that the probability of informed trading measured by VPIN has a good forecast effect on the future volatility of the market,and has a better applicability in China's stock index futures market.Based on the research of the VPIN metric method,we redesigns three strategies based on the original momentum reversal strategy and formulates an entry-exit rule based on the reasonable value of VPIN.From the results,the introduction of VPIN can effectively block the invalid trading signals and achieve higher returns.