Algorithmic Trading and DMA: An Introduction To Direct Access Trading Strategies by Barry Johnson

Summary: A good introduction to algorithmic trading. It is a guided tour of the algorithmic trading world. It is packed with information if you have the prerequisite background to understand the lingos used in the book. Lacking either one of the two background knowledges, programming / order routing (the technical side) and firm trading, will make it difficult to understand this book. Only recommending this book to those who are interested in the subject with at least one of the prerequisites.

Review

Algorithmic trading is a mythical thing for majority of retail traders. It sounds like a beast no one have seen yet dominating the trading world nowadays. Many retail traders are fascinated by the concept yet they can hardly find any useful information that shed some light on the subject.

This book is one of the first introductory text of algorithmic trading with all the minute details documented in a reference book manner. It gives the readers a comprehensive look at the market structures across the major markets and the ways orders are handled. After all, you have to learn the details of these orders in order to understand how algorithms exploit the structure of these markets.

I still remember this part of the book proves to be difficult to understand when I gave it to some of my programming staff several years ago. Until after I pointed them to read some books on firm trading that they realize the nusiance is necessary.

The second half of the book is the really useful part. It documents the various strategies firms are using and explains how these algorithms function. Although there is no exact example algorithm provided in the book, the descriptions of the strategies painted a good picture of what they are. Readers who want to investigate further can do so themselves.

Overall traders who are looking for specific trading techniques or algorithm to print money for them will be disappointed because that is not the purpose of this book. In fact, you will hardly find any profitable algorithms being published because the secret in making these algorithms profitable are hard to come by. This book is just the first step towards understanding a complex subject.

I would recommend this book to those who want to learn more about algorithmic trading. Be warned that if you are not good at programming and you do not have a basic understanding of firm trading business models, you will not benefit much from reading this book.

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