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FlowHFT: Imitation Learning via Flow Matching Policy for Optimal High-Frequency Trading under Diverse Market Conditions
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High-frequency trading (HFT) is an investing strategy that continuously monitors market states and places bid and ask orders at millisecond speeds. Traditional HFT approaches fit models with historical data and assume that future market states follow similar patterns. This limits the effectiveness of any single model to the specific conditions it was trained for. Additionally, these models achieve optimal solutions only under specific market conditions, such as assumptions about stock price's stochastic process, stable order flow, and the absence of sudden volatility. Real-world markets, however, are dynamic, diverse, and frequently volatile. To address these challenges, we propose the FlowHFT, a novel imitation learning framework based on flow matching policy. FlowHFT simultaneously learns strategies from numerous expert models, each proficient in particular market scenarios. As a result, our framework can adaptively adjust investment decisions according to the prevailing market state. Furthermore, FlowHFT incorporates a grid-search fine-tuning mechanism. This allows it to refine strategies and achieve superior performance even in complex or extreme market scenarios where expert strategies may be suboptimal. We test FlowHFT in multiple market environments. We first show that flow matching policy is applicable in stochastic market environments, thus enabling FlowHFT to learn trading strategies under different market conditions. Notably, our single framework consistently achieves performance superior to the best expert for each market condition.
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Cited by 1 Pith paper
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A shortcut flow policy trained on PPO expert demonstrations reduces simulated implementation shortfall and risk versus the experts, but the promised refinement mechanism is absent and the evaluation stays inside the t...
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