Algorithmic Trading & Execution

A backtest hands you a beautiful equity curve. Then you try to trade it — and the market quietly takes a slice of every order back. Execution is the bridge between a signal and a profit: the discipline of working a large “parent” order into the market as a stream of small “child” orders, fast enough to capture the alpha but slow enough not to move the price against yourself. This is where paper returns go to die, and where a few basis points of skill compound into a real edge.

Here’s the arc, from the cost no one sees to the machines that exploit it:

• The cost of trading — the explicit costs (commissions, fees, spread) versus the implicit ones (impact, timing, opportunity), and the trader’s dilemma: trade fast and pay impact, trade slow and bleed to drift.
• Implementation shortfall — the one true scorecard: paper return minus real return, decomposed into delay, spread, impact, timing, and opportunity cost.
• Market impact & the square-root law — why pushing twice the size does not cost twice as much, the difference between temporary and permanent impact, and the $\sigma\sqrt{Q/V}$ rule that governs capacity.
• Execution algorithms — the workhorses every desk runs: TWAP (by the clock), VWAP (by the volume curve), POV (by participation rate), and IS / arrival-price algos that race alpha against impact.
• Optimal execution — the Almgren–Chriss frontier: trading impact against timing risk, how risk aversion and a decaying signal set the optimal speed, and why there is no free trajectory.
• Transaction-cost analysis (TCA) — measuring execution quality honestly: arrival, VWAP, and close benchmarks, slippage attribution, and closing the feedback loop on your own algos.
• Backtesting & HFT — the execution traps that make a backtest lie (transaction-cost-naive fills, capacity, alpha decay) and a tour of the high-frequency strategies — market making, latency and statistical arbitrage — that live on the other side of your order.

This is the expert rung where a strategy meets the unforgiving reality of the order book — and a graded final exam runs the whole thing back at you, one locked question at a time.