5.9 Spread Widening During Volatility Expansion
Blow your spreads out when volatility does, because a fixed markup that was safe in a calm tape becomes a gift to informed traders in a moving one. Around scheduled news, stop quoting entirely.
Independent research on systematic & quantitative trading
Aligrithm is an independent research publication on systematic trading, quantitative research, market microstructure, and adaptive systems. Long-form essays, code notebooks, and architecture breakdowns across eight pillars, built for traders who care more about how markets behave than about hype.
More about the publication →The ten pillars
Read in order. Each pillar walks you out of one trap with one new ability. The newest article is the worst place to begin.
- 1 The Scientific Trader Rebuild what you accept as evidence. Every rule becomes a hypothesis, every backtest an experiment you can falsify. 28
- 2 Indicator Engineering The input decides the ceiling. Build features with measurable properties that survive the tests. 82
- 3 Robust Systems Lab A strategy is not robust for surviving one friendly backtest. Here it survives hostile testing. 41
- 4 Market Structure Notes The same rule is edge on one instrument and noise on another. Read a market's personality before you deploy. 74
- 5 Microstructure Alpha The order-book layer. The same signal is worthless as taker flow and valuable as a maker improvement. 48
- 6 Portfolio Construction & System Death A real signal still loses if the size and correlations are wrong. Sizing is part of the signal. 55
- 7 Python Research Notebooks Stop taking results on faith. Re-run every claim on your own data and see whether it holds. 5
- 8 Physics, Geometry & Event-Driven Markets The frontier. Markets as event-driven nonlinear systems, not fixed-time price series. Read it last. 10
- 9 Prediction Market Arbitrage The cleanest money on Polymarket and Kalshi comes from prices that contradict each other, not prices that turn out wrong. 41
- 10 Cross-Sectional & Factor Investing Stop timing one asset. Rank the whole cross-section and let relative value, not direction, carry the return. 19
Latest articles
5.8 Why Skewing Is Simpler Than People Think
Skewing is the academic favorite and the desk's afterthought. Make one side wider so it fills less, lean harder against aggression, and skip the stochastic control. Keep it simple.
5.7 Toxic Flow vs Inventory Risk
Holding some inventory is benign. Being loaded with toxic inventory by someone who knows it'll move against you kills the book. Skew exists to stop the loading, not to tidy variance.
5.6 Adverse Selection Explained for Traders
Quote both sides with no view and informed takers hit whichever side is about to move, leaving you the losing inventory. That is adverse selection, the permanent maker-versus-taker battle.
5.5 Why Forecast Accuracy Is Not Enough in Market Making
A maker's forecast is graded only on the fills it gets, and counterparties hand you the adverse ones. A 40% model across all moves can be a 30% model on the trades you actually make.
5.4 Markouts: The Truth Serum of Market Making
The markout asks one question of every fill: what did the price do next? It ignores the spread you collected and the cleverness you intended, exposing toxic flow as a curve that sinks.
5.3 Why Fair Value Is the Core of Market Making
Fair value is the price that gives good markouts when you quote around it. If your losses realize 750 ms after a fill, fair value is where price will be then, not today's mid.
5.2 The Three Pillars of Market Making: Fair Price, Spread, Skew
A market maker's quote is three stacked decisions: fair price, spread, skew. Fair price carries more than the other two combined, and skew, the academic favorite, is the trivial one.
5.1 Market Making Is Not Just Collecting the Spread
Posting a bid and ask is the easy part. The money comes from forecasting fair value, dodging informed flow, and skewing thousands of weak alphas into passive quotes at zero cost.
4.34 Currency Strength Models from Pair Decomposition
A quoted pair hides which currency moved. Solve the whole cross matrix jointly and each currency's strength decouples, giving X-ray vision through the quotes, fixed only up to a normalization.
4.33 Cross-Pair Signals: Can EUR Predict GBP?
EURUSD and GBPUSD move together because they share the dollar, not because EUR predicts GBP. Subtract the pairs (CMMA of one minus the other) to cancel the dollar and trade EUR-versus-GBP strength.
4.32 Using Gold as an FX Indicator
Gold is the dollar seen in a mirror, reading the common factor inside every USD pair. Use it as a dollar confirmer, cross-check real yields, and respect the crisis regime where the mirror breaks.