Algorithmic Trading: Winning Strategies and Their Rationale by Ernie Chan

Summary: Good introductory text on algo trading with Matlab code example. Heavy on the technical side that beginners can learn from. If you are familiar with Matlab and interested in a career in the algo trading field, this book is for you.

Review

This book is very different from Mr. Chan’s first book on quantitative trading. Unlike the first one, this book deals with the technical details of algo trading. This 180 degree turn probably caught many readers who bought this book based on their impressions on the first one by surprise. In short, this book is very technical and not many readers will enjoy it.

First part of the book focuses on the general concepts on algo trading, which was known as trading system or trading model before the latest buzzword craze on the term “algo”. All the considerations mentioned in the book related to backtesting and later on money management are pretty much well-known knowledge which you can learn from other classic titles on trading system design. Although the materials are not new, Mr. Chan has done a great job organizing the information into something more readable than many early titles on the same subject.

The rest of the book focuses on actual concepts and implementations of specific strategies. Programming and higher level math knowledge are necessary to fully understand this part of the book. People not working for trading firm or in the engineering field will find this part intimidating. Since Matlab is not everyone’s cup of tea, I can imagine it is a big turn off for even the programming savvy readers.

If it is the first book you are going to read on the subject and that you have access to Matlab, this book is a great investment.

p.s. I am not related to Ernie Chan =)

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