by David Schaurecker, David Wozabal, Nils Löhndorf, Thorsten Staake
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Suggested foundations for trading research and honest backtests and market microstructure and execution. Specialist prerequisites vary by paper.
Use only information available at the simulated decision time.
Separate model selection from the final evaluation.
Read bid, ask, depth and queue-based market state.
Understand why fills and order flow can carry information.
Reconcile signals, executions, positions and P&L.
Include the costs that can erase a paper strategy.
Connect trading speed and size to execution cost.
Choose a reproducible strategy, specify the trading rule, and test what remains after costs and estimation uncertainty.
Learn the trading state and execution trade-off before evaluating reinforcement-learning market makers.