# Every 100 trades, flatten inventory at mid price (simplified risk mgmt) if _ % 100 == 0 and inventory != 0: cash += inventory * mid_price inventory = 0
if flow == 1: # Aggressive buyer hits our ask cash += ask_limit inventory -= 1 elif flow == -1: # Aggressive seller hits our bid cash -= bid_limit inventory += 1 daemon goldsmith - order flow trading for fun and profit.pdf
Final PnL: $42.30 Total trades executed: 1000 Note: This ignores fees, slippage, and real market impact – for educational use only. | Risk | Description | |------|-------------| | Adverse selection | Informed traders buy before a drop or sell before a rise. | | Inventory risk | Holding a large long position when price falls. | | Latency | Slower daemons get picked off by faster HFT firms. | | Exchange risk | Downtime, API changes, or withdrawal halts. | | Regulatory | Market making may require registration in some jurisdictions. | # Every 100 trades, flatten inventory at mid
# Mark-to-market PnL mtm = cash + inventory * mid_price pnl.append(mtm) final_pnl = pnl[-1] - 10000 print(f"Final PnL: $final_pnl:.2f") print(f"Total trades executed: num_trades") | | Latency | Slower daemons get picked
Gross profit = $100.07 – $99.98 = $0.09 per unit.
Minus exchange fees (e.g., 0.1% taker fee on the exiting trade) → net ~$0.08. Below is a simplified backtest of a Daemon Goldsmith trading against random order flow.