OrderBook Imbalance

This strategy revolves around the idea that if there is a lot more pressure (i.e. quantity to be traded) of limits on either end of the OrderBook, the price will most likely move in the opposite direction.

Strategy

As usual we import start by defining a System that represents the core of our strategy.

using Trading
using Trading.Portfolio
using Trading.Strategies

struct OrderImbalance <: System
    trigger_min_size::Float64
    trigger_imbalance_ratio::Float64
end

trigger_min_size defines how large the largest limit quantity has to be, e.g. 5.0 would mean that the largest of the highest bid or lowest ask levels needs to at least have a quantity to be traded of 5.0. trigger_imbalance_ratio defines the imbalance between the best bid and ask quantities.

function Overseer.update(o::OrderImbalance, t::Trader, asset_ledgers)
    l = asset_ledgers[1]
    asset = l.asset
    s = spread(l)
    if s == 0
        # No quotes received yet
        return
    end

    q = latest_quote(l)

    # If a limit level exists with the best ask or bid we take
    # the total quantities from those, otherwise we simply take the
    # quantities in the latest quote
    ask_level = l[Ask][q.ask]
    if ask_level !== nothing
        ask_size = sum(x->x.quantity, ask_level)
        ask_price = ask_level.price
    else
        ask_size = q.ask.quantity
        ask_price = q.ask.price
    end

    bid_level = l[Bid][q.bid]
    if bid_level !== nothing
        bid_size = sum(x->x.quantity, bid_level)
        bid_price = bid_level.price
    else
        bid_size = q.bid.quantity
        bid_price = q.bid.price
    end


    smaller = min(ask_size, bid_size)
    larger  = max(ask_size, bid_size)

    ratio = smaller / larger

    if larger > o.trigger_min_size && ratio < o.trigger_imbalance_ratio
        orders = pending_orders(t, asset)
        if !isempty(orders.purchases) || !isempty(orders.sales)
            return
        end
        if bid_size > ask_size
            @info "Making purchase of $(ask_size) @ $(ask_price)"
            Entity(t, Purchase(asset,
                               ask_size,
                               OrderType.Limit,
                               TimeInForce.IOC,
                               ask_price,
                               0.0))
        else
            @info "Making sale of $(bid_size) @ $(bid_price)"
            Entity(t, Sale(asset,
                           bid_size,
                           OrderType.Limit,
                           TimeInForce.IOC,
                           bid_price,
                           0.0))
        end
    end
end

Possible Improvements

This strategy by itself is very unsuccessful and thus shouldn't be used in isolation. The clearest improvement lies in determining a valid exit strategy, which it lacks completely. Secondly, instead of using only the first level of price information, considering the further levels in the OrderBook could prove useful (see ceil and floor).