- Paperback: 592 pages
- Publisher: 4Myeloma Press (February 17, 2010)
- Language: English
- ISBN-10: 0956399207
- ISBN-13: 978-0956399205
- Product Dimensions: 7.4 x 1.3 x 9.7 inches
- Shipping Weight: 2.8 pounds (View shipping rates and policies)
- Average Customer Review: 46 customer reviews
- Amazon Best Sellers Rank: #54,632 in Books (See Top 100 in Books)
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Algorithmic Trading and DMA: An introduction to direct access trading strategies
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Algorithmic trading and optimal execution have become cornerstones of modern finance. "Algorithmic Trading and DMA" does an excellent job of providing one of the first comprehensive overviews of these areas. Anyone interested in these developments should own a copy of this book. --Petter Kolm, Director of the Mathematics in Finance Masters Program and Clinical Associate Professor of Mathematics, Courant Institute of Mathematical Sciences, New York University
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Top customer reviews
But, it was not for complete newbie like me.
If you have get some experience and want to know if there is something missed, this book will be definitely helpful.
If you have no experience and expect some introduction, you will be overwhelmed by too broad topics and too many tables and lists.
I think title is a litte mis-leading.
I've purchased and read a lot of trading books out there, coming across plenty that are a giant waste of money, NOT this one. This book is by far the best of its kind, even though theres not many out there on these topics.
Being an electrical engineer with a fair amount of algorithm development experience, I could understand some of the more technical aspects. However, I still find some of the financial and market terminology is rather elusive.
That's not a fault of the book or author, but just indicates that I need to learn more about markets, asset pricing, etc.
Overall, an excellent book which I hope will amply reward my persistence.
It describes so many things which is hard to find in internet or in other books. Of course, some information may be found in documents from liquidity provides, but this book is aggregator which is implemented in the most efficient way.
Buy it today and tomorrow you will be one of us, enlightened.
The approach used in the book is very pedagogic. The author illustrates each and every trading strategy with an example and a figure, which permits to clearly grasp the motivation, the intuition and the ideas behind each trading scenario. He takes a good time explaining the variables that determine prices, liquidity, market impact and volatility. He also provides a lot of references for the readers willing to go deeper on a specific topic, and the summaries at the end of each chapter are an excellent addition.
In my opinion it is far better to understand the mechanisms of trading in today's electronic environment than just learning ready-to-use recipes. It is indeed the ignorant use of financial instruments that is at the genesis of the current crisis. Therefore, the author has my full admiration and support because he manages to provide a full understanding and grounding of algorithmic trading.
However, I have to put only 4 stars for the following reasons.
Algorithmic trading is crucial today not only because it is far more reactive than human traders, but also because it can predict and exploit trading patterns more accurately. Unfortunately, the book only has a subsection on forecasting market conditions and short-term prediction of prices, trading volume and volatility. Each one of these topics deserves a full chapter because they are the main reason why we are switching from human trading to algorithmic trading.
Another topic that is crucial for algorithmic trading is arbitrage. Again, the book falls short, just adding a subsection on the topic. Moreover, the author cites a result that seems to show that implied volatility is a more accurate measure than statistical volatility such as GARCH. The empirical evidence says the contrary, i.e. that GARCH and other volatility measures like bipower variation predict better than implied volatility, in particular for high frequency data. This feature is in fact exploited by quantitative hedge funds and proprietary trading desks.
The author also skips the stylized facts from the empirical analysis of financial time series: returns are not normal and exhibit high peaks, fat tails, auto-correlation and volatility clustering. It is the evidence of these facts and the necessity to understand and control them that has given to Finance the mathematical and computational trend it currently has.
My suggestions for mathematical references are the following classic books:
A. Shiryaev Essentials of Stochastic Finance: Facts, Models, Theory
P. Embrechts Quantitative Risk Management: Concepts, Techniques, and Tools (Princeton Series in Finance)
EDIT Nov 23, 2013
Concerning references on market microstructure with other flavours than mathematics and computer science, I would recommend the following two classics:
For a trader's point of view, L. Harris Trading and Exchanges: Market Microstructure for Practitioners. It takes you to the basics, from brokers to traders to Limit Orders to Market Orders to market-makers to electronic markets. I would recommend to read this book before Barry Johnson's.
For an economist's point of view, M. O'Hara Market Microstructure Theory. It does explain in detail several classical models based on inventory risk and asymmetry of information.
Most of the techniques described are assumed to be used by institutional investors, but in the last chapters there is also some content that might be of interest for private investors. I would like to have some more about the later and HFT, but in general the book is pretty good.
There is one caveat, and that is, for the type of person who needs in-depth coverage of this material, this book is a godsend. But if you're not one of those people - if you're looking for a more introductory text, then, yeah, you might not enjoy this book as much as I and other people have.
I suppose the best way to look at this book is that it kind of picks up where Larry Harris' "Trading & Exchanges" (also an excellent book by the way) ends. Mr. Johnson's book goes into even more nitty-gritty detail. I loved both the Harris text and this one.