Hey guys,
Over the last few days, I have been researching ways to execute large trades within an illiquid market, while minimizing market impact, but I am having some trouble.
Here is what I am trying to do.
Say I have 100 BCH(bitcoin cash) and want to liquidate this for BTC. If I was to place a market order, I would walk the orderbook and cause massive cost to me in slippage. Now If I break up the order and set limit orders, I would not get filled fast enough (under 5 mins) and variance in price could mean my orders never get filled.
I guess my main question is, how do HFT firms liquidate a large volume of securities, quickly, without moving the market a massive amount.
I am leaning towards a model that splits orders into multiple bits, however, I need to find an optimal price, the optimal time between order placement, and minimize market impact.
I know this is no easy feat, and I did find the paper attached outlining Almgren-Chriss's method of doing this, however, I am not quite sure how to implement this within python.
I have found other strategies as well, including TWAP/VWAP, however, I also found they tend to break down in low liquidity environments.
Any help with this would be greatly appreciated.
The Paper
Almgren-Chriss Method
