Order Flow Imbalance Trading Simulation

[01] problem

Turn changes at the best bid and ask into a signal that anticipates short-horizon price moves.

[02] approach

1. 01Order flow imbalance is computed from bid/ask price and size changes between consecutive book updates.
2. 02Thresholded imbalance generates short-horizon buy/sell signals.
3. 03Signals are backtested on market data, tracking PnL, drawdown and hit rate.

[03] what's interesting

• Signal quality is judged on drawdown and hit rate as well as PnL.

[04] stack