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


In the seemingly complex trading world where every trader strives to better other traders out there, individual traders seem to be losing the battle against the professional ones. Ernest Chan’s Quantitative Trading will arm you with a powerful algorithmic trading prowess that, when studied and applied carefully, has the potential to propel you to the quantitative trading pedestal.

The book contains practical tips that you need to know about quantitative trading. Leafing through the book, it will guide you to:

  • Develop your own trading weaponry or strategy you are comfortable using;
  • Test your arsenal or developed strategy through various platforms available to test its effectiveness
  • Implement your own trading system to use your trading strategy; and
  • Adjust your strategies depending on its efficiency

About the Author

Ernest Chan is an experienced algorithmic trader and advisor who has a passion for teaching young and old traders alike in developing and implementing statistical trading strategies. He has experience working as a researcher in various banks such as Morgan Stanley and Credit Suisse. 

Table of Contents

Quantitative Trading is a book replete with statistical trading concepts. It has the following chapters:

Chapter 1 The Whats, Whos, and Whys of Quantitative Trading

Who can become a Quantitative Trader?

The Business Case for Quantitative Trading

The Way Forward

Chapter 2 Fishing for Ideas

How To Identify a Strategy That Suits You

A Taste for Plausible Strategies and Their Pitfalls

Chapter 3 Backtesting

Common Backtesting Platforms

Finding and Using Historical Databases

Performance Measurement

Common Backtesting Pitfalls to Avoid

Transaction Costs

Strategy Refinement

Chapter 4 Setting Up Your Business

Business Structure: Retail or Proprietary?

Choosing a Brokerage or Proprietary Trading Firm

Physical Infrastructure

Chapter 5 Execution Systems

What an Automated Trading System Can Do for You

Minimizing Transaction Costs

Testing Your System by Paper Trading

Why Does Actual Performance Diverge from Expectations?

Chapter 6 Money and Risk Management

Optimal Capital Allocation and Leverage

Risk Management

Psychological Preparedness

Chapter 7 Special Topics in Quantitative Trading

Mean-Reverting versus Momentum Strategies

Regime Switching

Stationary and Cointegration

Factor Models

What is Your Exit Strategy?

Seasonal Trading Strategies

Chapter 8 Conclusion: Can Independent Traders Succeed?

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