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Book Description

Dive into algo trading with step-by-step tutorials and expert insight

Machine Trading is a practical guide to building your algorithmic trading business. Written by a recognized trader with major institution expertise, this book provides step-by-step instruction on quantitative trading and the latest technologies available even outside the Wall Street sphere. You'll discover the latest platforms that are becoming increasingly easy to use, gain access to new markets, and learn new quantitative strategies that are applicable to stocks, options, futures, currencies, and even bitcoins. The companion website provides downloadable software codes, and you'll learn to design your own proprietary tools using MATLAB. The author's experiences provide deep insight into both the business and human side of systematic trading and money management, and his evolution from proprietary trader to fund manager contains valuable lessons for investors at any level.

Algorithmic trading is booming, and the theories, tools, technologies, and the markets themselves are evolving at a rapid pace. This book gets you up to speed, and walks you through the process of developing your own proprietary trading operation using the latest tools.

  • Utilize the newer, easier algorithmic trading platforms
  • Access markets previously unavailable to systematic traders
  • Adopt new strategies for a variety of instruments
  • Gain expert perspective into the human side of trading

The strength of algorithmic trading is its versatility. It can be used in any strategy, including market-making, inter-market spreading, arbitrage, or pure speculation; decision-making and implementation can be augmented at any stage, or may operate completely automatically. Traders looking to step up their strategy need look no further than Machine Trading for clear instruction and expert solutions.

Table of Contents

  1. Cover
  2. Series Page
  3. Title Page
  4. Copyright
  5. Dedication
  6. Preface
  7. Chapter 1: The Basics of Algorithmic Trading
    1. Historical Market Data
    2. Live Market Data
    3. Backtesting and Trading Platforms
    4. Brokers
    5. Performance Metrics
    6. Portfolio Optimization
    7. Summary
    8. Exercises
    9. Endnotes
  8. Chapter 2: Factor Models
    1. Time‐series Factors
    2. Cross‐sectional Factors
    3. A Two‐Factor Model
    4. Using Option Prices to Predict Stock Returns
    5. Short Interest
    6. Liquidity
    7. Statistical Factors
    8. Putting Them All Together
    9. Summary
    10. Exercises
    11. Endnotes
  9. Chapter 3: Time‐Series Analysis
    1. AR(p)
    2. ARMA(p, q)
    3. VAR(p)
    4. State Space Models
    5. Summary
    6. Exercises
    7. Endnotes
  10. Chapter 4: Artificial Intelligence Techniques
    1. Stepwise Regression
    2. Regression Tree
    3. Cross Validation
    4. Bagging
    5. Random Subspace and Random Forest
    6. Boosting
    7. Classification Tree
    8. Support Vector Machine
    9. Hidden Markov Model
    10. Neural Network
    11. Data Aggregation and Normalization
    12. Application to Stocks Selection
    13. Summary
    14. Exercises
    15. Endnotes
  11. Chapter 5: Options Strategies
    1. Trading Volatility without Options
    2. Predicting Volatility
    3. Event‐Driven Strategies
    4. Gamma Scalping
    5. Dispersion Trading
    6. Cross‐Sectional Mean Reversion of Implied Volatility
    7. Summary
    8. Exercises
    9. Endnotes
  12. Chapter 6: Intraday Trading and Market Microstructure
    1. Latency Reduction
    2. Order Type and Routing Optimization
    3. Adverse Selection Reduction
    4. Backtesting Intraday Strategies
    5. Order Flow
    6. Order Book Imbalance
    7. Summary
    8. Exercises
    9. Endnotes
  13. Chapter 7: Bitcoins
    1. Bitcoin Facts
    2. Time‐Series Techniques
    3. Mean Reversion Strategy
    4. Artificial Intelligence Techniques
    5. Order Flow
    6. Cross‐Exchange Arbitrage
    7. Summary
    8. Exercises
    9. Endnotes
  14. Chapter 8: Algorithmic Trading Is Good for Body and Soul
    1. Your Mind and Your Health
    2. Trading as a Service
    3. Does This Stuff Really Work?
    4. Keeping Up with the Latest Trends
    5. Managing Other People's Money
    6. Conclusion
    7. Endnotes
  15. Bibliography
  16. About the Author
  17. Index
  18. End User License Agreement
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