The Control Strategies for High Frequency Algorithmic Trading

High Frequency Algorithmic Trading has developed rapidly in recent years as the disruptive information technology such as deep learning emerges. So, do the public concerns about the security and reliability of the algorithmic trading in stock markets as well. Taking advantage of the highly fluctuated trading data, the automated methods of trading have evolved accordingly. This article first reviews the existing literature on algorithmic trading, electronic trading, and high frequency trading. The most important underlying control strategy and mechanism of high frequency algorithmic trading is named “market maker” in stock market. Accordingly, we analyze the fundamental characteristics and functions of market maker in trading and illustrate several control strategies in high frequency algorithmic trading. Our work open the door for the design of sophisticated automated control strategies for financial markets, which are fundamentally different from those for traditional physical systems such as air traffic control system.