5.18 Why Small Alphas Matter More for Makers Than Takers
A half-bp signal is garbage to a taker who pays the spread and money to a maker who collects it. That cost flip turns thousands of weak alphas into the bulk of a maker's PnL.
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. 44
- 4 Market Structure Notes The same rule is edge on one instrument and noise on another. Read a market's personality before you deploy. 77
- 5 Microstructure Alpha The order-book layer. The same signal is worthless as taker flow and valuable as a maker improvement. 53
- 6 Portfolio Construction & System Death A real signal still loses if the size and correlations are wrong. Sizing is part of the signal. 59
- 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. 12
- 9 Prediction Market Arbitrage The cleanest money on Polymarket and Kalshi comes from prices that contradict each other, not prices that turn out wrong. 42
- 10 Cross-Sectional & Factor Investing Stop timing one asset. Rank the whole cross-section and let relative value, not direction, carry the return. 22
Latest articles
5.17 TWAP and VWAP Are Execution Models, Not Just Indicators
TWAP and VWAP are not indicators to cross over. They are execution benchmarks and the slicing algorithms built to hit them, the machinery for moving a large order without blowing out the price.
5.16 Fill Probability from Trade Size CDFs
A quote's PnL is easy; its fill probability is the hard part. Build a CDF of taker order sizes and read off the chance the next trade is big enough to clear the queue ahead of you plus your own size.
5.15 Using Trade Flow to Predict Short-Term Price Movement
Trade flow reads liquidity being taken, not posted. Signed and summed, it predicts price because trades are autocorrelated: buys follow buys. And unlike book imbalance, executions can't be spoofed.
5.14 Microprice: Better Than Mid Price?
The plain mid ignores resting sizes. The weighted mid and microprice lean the center toward the thin side, where price is headed, giving a maker a fair value that already respects the book.
5.13 Order Book Imbalance: The First Microstructure Feature to Test
Order book imbalance, bid size minus ask size over their sum, is the strongest simple microstructure feature. Price rolls toward the thin side, and the signal lives in the tails, so fit a spline.
5.12 Spoofing, Sturdy Liquidity, and Book Pressure
Half the big orders in crypto are spoofs that vanish on approach. Lean on one and the price runs through your fill. Filter for sturdy size, and trade the turn a spoof's disappearance creates.
5.11 How to Use Order Book Density for Better Limit Orders
The book is a landscape of walls and gaps. Average density over minutes and place in front of shelves that stay stocked, weighing the edge of sitting behind size against the aggression to reach it.
5.10 Order Placement Alpha: The Forgotten Edge
Order placement, the exact tick you rest on, matters more than skewing. Sit just in front of a large sturdy order so takers can't push the price through your fill, and your markouts improve.
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.
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.