The goal of the TestTradingSimulation class is to create the full trading system by gathering all the prior critical components together.

This class checks whether, for a given input, we have the expected output. Additionally, we will test whether the PnL of the trading strategy has been updated accordingly.

We will first need to create all the deques representing the communication channels within the trading systems:

import unittest
 from chapter7.LiquidityProvider import LiquidityProvider
 from chapter7.TradingStrategy import TradingStrategy
 from chapter7.MarketSimulator import MarketSimulator
 from chapter7.OrderManager import OrderManager
 from chapter7.OrderBook import OrderBook
 from collections import deque
 
 class TestTradingSimulation(unittest.TestCase):
     def setUp(self):
         self.lp_2_gateway=deque()
         self.ob_2_ts = deque()
         self.ts_2_om = deque()
         self.ms_2_om = deque()
         self.om_2_ts = deque()
         self.gw_2_om = deque()
         self.om_2_gw = deque()

We instantiate all the critical components of the trading system:

            self.lp=LiquidityProvider(self.lp_2_gateway)
         self.ob=OrderBook(self.lp_2_gateway, self.ob_2_ts)
         self.ts=TradingStrategy(self.ob_2_ts,self.ts_2_om,self.om_2_ts)
         self.ms=MarketSimulator(self.om_2_gw,self.gw_2_om)
         self.om=OrderManager(self.ts_2_om, self.om_2_ts,self.om_2_gw,self.gw_2_om)

We test whether. by adding two liquidities having a bid higher than the offer, we will create two orders to arbitrage these two liquidities. We will check whether the components function correctly by checking what they push to their respective channels. Finally, since we will buy 10 liquidities at a price of 218 and we sell at a price of 219, the PnL should be 10:

      def test_add_liquidity(self):
         # Order sent from the exchange to the trading system
         order1 = {
             'id': 1,
             'price': 219,
             'quantity': 10,
             'side': 'bid',
             'action': 'new'
         }
         self.lp.insert_manual_order(order1)
         self.assertEqual(len(self.lp_2_gateway),1)
         self.ob.handle_order_from_gateway()
         self.assertEqual(len(self.ob_2_ts), 1)
         self.ts.handle_input_from_bb()
         self.assertEqual(len(self.ts_2_om), 0)
         order2 = {
             'id': 2,
             'price': 218,
             'quantity': 10,
             'side': 'ask',
             'action': 'new'
         }
         self.lp.insert_manual_order(order2.copy())
         self.assertEqual(len(self.lp_2_gateway),1)
         self.ob.handle_order_from_gateway()
         self.assertEqual(len(self.ob_2_ts), 1)
         self.ts.handle_input_from_bb()
         self.assertEqual(len(self.ts_2_om), 2)
         self.om.handle_input_from_ts()
         self.assertEqual(len(self.ts_2_om), 1)
         self.assertEqual(len(self.om_2_gw), 1)
         self.om.handle_input_from_ts()
         self.assertEqual(len(self.ts_2_om), 0)
         self.assertEqual(len(self.om_2_gw), 2)
         self.ms.handle_order_from_gw()
         self.assertEqual(len(self.gw_2_om), 1)
         self.ms.handle_order_from_gw()
         self.assertEqual(len(self.gw_2_om), 2)
         self.om.handle_input_from_market()
         self.om.handle_input_from_market()
         self.assertEqual(len(self.om_2_ts), 2)
         self.ts.handle_response_from_om()
         self.assertEqual(self.ts.get_pnl(),0)
         self.ms.fill_all_orders()
         self.assertEqual(len(self.gw_2_om), 2)
         self.om.handle_input_from_market()
         self.om.handle_input_from_market()
         self.assertEqual(len(self.om_2_ts), 3)
         self.ts.handle_response_from_om()
         self.assertEqual(len(self.om_2_ts), 2)
         self.ts.handle_response_from_om()
         self.assertEqual(len(self.om_2_ts), 1)
         self.ts.handle_response_from_om()
         self.assertEqual(len(self.om_2_ts), 0)
         self.assertEqual(self.ts.get_pnl(),10)