Quantitative Trading: How to Build Your Own Algorithmic Trading Business by Ernie Chan

Summary: Good introduction to trading mechanically for yourself as a retail trader. Lower your expectations though as there is no top secret trading model disclosured. Matlab understanding useful but not necessary for a small part of the book. I would recommend this book if it is your first one on the subject.

Review

This is the first book from Ernie Chan that turns into a surprise hit during the initial craze for everything “algo”.

This book is a guided tour on quantitative trading. It covers the basic concepts on trading the quantitative way (i.e. mechanical trading) from running it as a business, data mining, backtesting and other nusiance of automated trading. Since it is an introduction to the concept and it looks like Mr. Chan tries hard to cover all the grounds, it feels weak on the more advanced topics which I suspect many pros thought that is what they are paying for.

The more general trading related topcis on money management etc. can be found in other books that cover those topics in depth. It looks to me that Mr. Chan does not really pay a lot of attention on these topics himself. I consider this part of the book inadequate.

It is funny that Mr. Chan has a chapter on fishing ideas. While he mentions you can look for ideas from various websites, he also states that most of the ideas would not withstand rigorous backtesting. Stories he shares there together with the criteria he mentioned for picking trading strategies pretty much sums up his view on dependable trading models.

Matlab understanding will help but not necessary to read this book.

I would recommend this book to anyone with no prior trading knowledge who want to know something about quantitative trading. If you have read quite a number of books on the subject already, you will probably be disappointed.

The book was priced at the high-end originally and the price has come down quite a bit since.

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

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