In trading and in trading-related research one could be quickly overwhelmed with the sea of ink devoted to trading strategies and the like. It is essential that you “pick your battles” so to speak. I recently finished reading Machine Trading, by Ernest Chan. Here is what I think about the book.
The book is extremely friendly. Writing is lucid and down to earth, which makes it an easy read. The author is in the business of algorithmic trading, which is clear from the outset. However, he is also in the business of sharing his knowledge, at least a big chunk of it. The book is packed with solid references and practical resources- literature, data and lurking ideas. Even if you are experienced professional you are likely to come across something new and useful amongst the Market Data (historical and live), or the Trading Platforms sections. As with most self-respecting professional books nowadays, the book is accompanied by computer (Matlab) code to play around with and expand on.
It is a refreshingly honest book, an important quality in this business. The author does not shy away from discussing some surrounding pitfalls around algorithmic trading. Notions like Overfitting and\or Slippage take center stage when they need to, and you will not find suspicious claims to riches.
Of course, personally I would like to see more. Being compact and an easy read on the one hand, makes it compact and an easy read on the other hand. For example, I think Interactive Brokers are good and have good API’s, so would be nice to see a set-up walk through. The book also does not expand on the algorithms it presents in any meaningful way. Therein lies the danger of people scripting without any deep understanding; though the references are there for anyone who wishes to dive in. It is, of course, a matter of choice. To expand properly on some topics, you expand from one book to seven books, so it is also understandable.
- Excellent review of factor models. Nice Kalman filter example
- Interesting chapter on Bitcoins in the context of FX trading
- Inspiring and personal account of leaping into independence, with some good practical, unpretentious, encouragement and advice