Friday, 25 March 2022

OrderBook and PositionBook Features

In my previous post I talked about how I planned to use constrained optimization to create features from Oanda's OrderBook and PositionBook data, which can be downloaded via their API. In addition to this I have also created a set of features based on the idea of Order Flow Imbalance (OFI), a nice exposition of which is given in this blog post along with a numerical example of how to calculate OFI. Of course Oanda's OrderBook/PositionBook data is not exactly the same as a conventional limit order book, but I thought they are similar enough to investigate using OFI on them. The result of these investigations is shown in the animated GIF below.

This shows the output from using the R Boruta package to check for the feature relevance of OFI levels to a depth of 20 of both the OrderBook and PositionBook to classify the sign of the log return of price over the periods detailed below following an OrderBook/PositionBook update (the granularity at which the OrderBook/PositionBook data can be updated is 20 minutes):

  • 20 minutes
  • 40 minutes
  • 60 minutes
  • the 20 minutes starting 20 minutes in the future
  • the 20 minutes starting 40 minutes in the future
for both the OrderBook and PositionBook, giving a total of 10 separate images/results in the above GIF.
Observant readers may notice that in the GIF there are 42 features being checked, but only an OFI depth of 20. The reason for this is that the data contain information about buys/sell orders and long/short positions both above and below the current price, so what I did was calculate OFI for:
  • buy orders above price vs sell orders below price
  • sell orders above price vs buy orders below price
  • long positions above price vs short positions below price
  • short positions above price vs long positions below price 
As can be seen, almost all features are deemed to be relevant with the exception of 3 OFI levels rejected (red candles) and 2 deemed tentative (yellow candles).

It is my intention to use these features in a machine learning model to classify the probability of future market direction over the time frames mentioned above. 

More in due course.

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