Quantitative Trading: How to Build Your Own Algorithmic Trading Business (Wiley Trading) [Hardcover]

Ernie Chan (Author)

Book Description

Series: Wiley Trading | Publication Date: November 17, 2008

While institutional traders continue to implement quantitative (or algorithmic) trading, many independent traders have wondered if they can still challenge powerful industry professionals at their own game? The answer is "yes," and in Quantitative Trading, Dr. Ernest Chan, a respected independent trader and consultant, will show you how. Whether you're an independent "retail" trader looking to start your own quantitative trading business or an individual who aspires to work as a quantitative trader at a major financial institution, this practical guide contains the information you need to succeed.

Editorial Reviews

From the Inside Flap

By some estimates, quantitative (or algorithmic) trading now accounts for over one-third of trading volume in the United States. While institutional traders continue to implement this highly effective approach, many independent traders—with limited resources and less computing power—have wondered if they can still challenge powerful industry professionals at their own game? The answer is "yes," and in Quantitative Trading, author Dr. Ernest Chan, a respected independent trader and consultant, will show you how.

Whether you're an independent "retail" trader looking to start your own quantitative trading business or an individual who aspires to work as a quantitative trader at a major financial institution, this practical guide contains the information you need to succeed.

Organized around the steps you should take to start trading quantitatively, this book skillfully addresses how to:

• Find a viable trading strategy that you're both comfortable with and confident in

• Backtest your strategy—with MATLAB®, Excel, and other platforms—to ensure good historical performance

• Build and implement an automated trading system to execute your strategy

• Scale up or wind down your strategies depending on their real-world profitability

• Manage the money and risks involved in holding positions generated by your strategy

• Incorporate advanced concepts that most professionals use into your everyday trading activities

• And much more

While Dr. Chan takes the time to outline the essential aspects of turning quantitative trading strategies into profits, he doesn't get into overly theoretical or sophisticated theories. Instead, he highlights the simple tools and techniques you can use to gain a much-needed edge over today's institutional traders.

And for those who want to keep up with the latest news, ideas, and trends in quantitative trading, you're welcome to visit Dr. Chan's blog, epchan.blogspot.com, as well as his premium content Web site, epchan.com/subscriptions, which you'll have free access to with purchase of this book.

As an independent trader, you're free from the con-straints found in today's institutional environment—and as long as you adhere to the discipline of quantitative trading, you can achieve significant returns. With this reliable resource as your guide, you'll quickly discover what it takes to make it in such a dynamic and demanding field.

From the Back Cover

Praise for Quantitative Trading

"As technology has evolved, so has the ease in developing trading strategies. Ernest Chan does all traders, current and prospective, a real service by succinctly outlining the tremendous benefits, but also some of the pitfalls, in utilizing many of the recently implemented quantitative trading techniques."
—PETER BORISH, Chairman and CEO, Computer Trading Corporation

"Dr. Ernest Chan provides an optimal framework for strategy development, back-testing, risk management, programming knowledge, and real-time system implementation to develop and run an algorithmic trading business step by step in Quantitative Trading."
—YASER ANWAR, trader

"Quantitative systematic trading is a challenging field that has always been shrouded in mystery, seemingly too difficult to master by all but an elite few. In this honest and practical guide, Dr. Chan highlights the essential cornerstones of a successful automated trading operation and shares lessons he learned the hard way while offering clear direction to steer readers away from common traps that both individual and institutional traders often succumb to."
—ROSARIO M. INGARGIOLA, CTO, Alphacet, Inc.

"This book provides valuable insight into how private investors can establish a solid structure for success in algorithmic trading. Ernie's extensive hands-on experience in building trading systems is invaluable for aspiring traders who wish to take their knowledge to the next level."
—RAMON CUMMINS, private investor

"Out of the many books and articles on quantitative trading that I've read over the years, very few have been of much use at all. In most instances, the authors have no real knowledge of the subject matter, or do have something important to say but are unwilling to do so because of fears of having trade secrets stolen. Ernie subscribes to a different credo: Share meaningful information and have meaningful interactions with the quantitative community at large. Ernie successfully distills a large amount of detailed and difficult subject matter down to a very clear and comprehensive resource for novice and pro alike."
—STEVE HALPERN, founder, HCC Capital, LLC

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Product Details

• Hardcover: 208 pages
• Publisher: Wiley; 1 edition (November 17, 2008)
• Language: English
• ISBN-10: 0470284889
• ISBN-13: 978-0470284889
• Product Dimensions: 9 x 6.2 x 0.9 inches
• Shipping Weight: 13.6 ounces (View shipping rates and policies)
• Average Customer Review: 3.5 out of 5 stars  See all reviews (19 customer reviews)
• Amazon Best Sellers Rank: #50,560 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

64 of 73 people found the following review helpful:

4.0 out of 5 stars A good road map of the issues to consider, November 25, 2008

By 

ETO Trader (Melbourne, Australia) - See all my reviews

This review is from: Quantitative Trading: How to Build Your Own Algorithmic Trading Business (Wiley Trading) (Hardcover)

This book lays out a road map for an independent trader to follow if they want to establish themselves as a home based quantitative trader. Whilst the title contains the words quantitative and algorithmic, it isn't heavy with high level mathematics or concepts. Instead key issues are covered in a straightforward easy to read manner.
What makes the book work is Dr Chan's personal insights from his career and experiences are intertwined throughout the topics. This leaves the reader with a great deal of confidence in his suggested approach. Most of the issues in the book are covered at a basic to intermediate level - certainly enough for you to be able to go and do further research and to know what the key issues are and what to look out for.
Criticisms - maybe the focus on Matlab, though he does recommend some cheaper clone packages that may run his example code with minor modifications.
This is a practical book. There's no pop trading psychology (though there is a psychology chapter), nor does it give you a system or rely on strategies that aren't generally available to the retail trader.
Being quantitative, strategies where discussed tend to be mean reversion or momentum based. Technical analysis isn't used as a driver for strategies. Ideas for potential quantitative strategies are discussed, but readers looking for up and running systems will need to look elsewhere.
Instead, Quantitative Trading shows the procedure for taking a strategy, combining it with correct test techniques, good execution tools and position management, and from that forming the basis for a genuinely successful home based quantitative operation.
Anyone who trades would benefit from this book as many of its discussed issues, techniques, tips and traps are universal to any trader.

20 of 23 people found the following review helpful:

5.0 out of 5 stars For Practitioners, October 17, 2009

By 

Linus Nilsson - See all my reviews
(REAL NAME)   

Amazon Verified Purchase

This review is from: Quantitative Trading: How to Build Your Own Algorithmic Trading Business (Wiley Trading) (Hardcover)

Quantitative Trading: How to Build Your Own Algorithmic Trading Business (Wiley Trading), is a book written by a practitioner for practitioners. A mix of practical advices, some sample code, and a fair amount of experience, this book is a good summary, although a bit unstructured, what one needs to think about when it comes to starting your own quant trading firm or simply running your own capital in a systematic way.

While there is no ready-made, plug-and-play strategies inside the book, it does contain a number of potential strategy ideas that is worth testing. Chan is mostly focused on long/short equity strategies, mostly because that's is where he has his background. A good read, would read it again.

36 of 45 people found the following review helpful:

2.0 out of 5 stars Somo interesting insights..., December 26, 2008

By 

AGJr (Sao Paulo, Brazil) - See all my reviews

Amazon Verified Purchase

This review is from: Quantitative Trading: How to Build Your Own Algorithmic Trading Business (Wiley Trading) (Hardcover)

... but too shallow. Most of the content is just common sense, and most of the technical part, including Matlab and Excel code, of little use. Nevertheless, it gives you a blueprint of important things to take into account when going into Algorithmic Trading.