Optimising order splitting and execution with fuzzy logic momentum analysis

Abstract

This study proposes a new framework for high frequency trading using a fuzzy logic based momentum analysis system. An order placement strategy will be developed and optimised with adaptive neuro fuzzy inference in order to analyse the current "momentum" in the time series and to identify the current market condition which will then be used to decide the dynamic participation rate given the current traded volume. The system was applied to trading of financial stocks, and tested against the standard volume based trading system. The results show how the proposed Fuzzy Logic Momentum Analysis System outperforms the standard volume based systems that are widely used in the financial industry. © 2011 Springer Science+Business Media B.V.