Intro
There are as many strategies for extracting alpha from the markets as there are traders. Unfortunately, this article will be discussing none of them. If that’s what you’re looking for, I suggest you check out the very sophisticated techniques covered in this video.
OK. If you’re still reading, you probably take trading at least somewhat seriously. When setting up your trading business (and it is a business, like any other), one of the most important things to consider is the impact that costs will have on your bottom line. And just like any other business, traders deal with costs in many forms. This article will discuss the explicit and implicit costs that are incurred on every transaction in global markets. We’ll apply this primer to a real world application for the cryptocurrency derivatives exchange Bitmex, with its unique properties. Finally, we’ll develop a simple execution algorithm that should help to reduce the impact costs have on our PnL. If any of that sounds remotely interesting or useful, read on!
Notebook for this article can be found here.
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