Algorithmic Trading

Algorithmic Trading has grown dramatically, from a tool used by only the most sophisticated traders to one used daily by virtually every major investment firm and broker.



Trading algorithms today have permeated trading in most asset classes, not only traditional assets like stocks, but also more exotic assets like cryptocurrencies.



This book aims to provide portfolio managers, traders, and other finance professionals with in-depth information about how trading algorithms actually work in practice. The book provides detailed coverage of:



• Single-order algorithms, such as Volume-Weighted Average Price (VWAP), Time-Weighted Average Price (TWAP), Percent of Volume (POV), and variants of the Implementation Shortfall algorithm.



• Multi-order algorithms, such as Pairs Trading and Portfolio Trading algorithms.•Smart routers, including “smart market,” “smart limit,” and dark aggregators.



• Trading performance measurement, including trading benchmarks, “algo wheels,” trading cost models, and other measurement issues.



REVIEWS

"In Algorithmic Trading, Jeff Bacidore takes us from the simplest order splitting rules to the advanced workings of opportunistic strategies and smart order routers. Drawing on his deep experience as a designer and user of algorithms, he presents a comprehensive framework for classifying them and exploring their features. In the process, he addresses many of the fundamental questions: What sorts of problems are algorithmic strategies trying to solve? What trade-offs govern the selection and use of particular algorithms? What are their limitations? How do we measure their performance? The exposition deftly combines the institutional realities of markets, the economic intuitions behind the strategies, and numerical examples that illustrate their use. The reader will come away with an expanded appreciation and comprehension of how our modern financial markets actually operate."



- Joel Hasbrouck, Professor of Finance and Kenneth G. Langone Professor of Business, Stern School of Business, NYU.





"I have taught trading and markets for nearly twenty years. Bacidore's book will allow me to replace a hodgepodge of industry white papers and blog posts on algorithms, smart order routing, and performance evaluation with a self-contained document that places each of these tools in perspective. The book presents material in a way that makes it assessable to both students and practitioners. My expectation is that professors teaching trading and markets will make Algorithmic Trading: A Practitioner's Guide required reading. Thanks for writing this book!"



- Robert Battalio, Professor of Finance and the William and Cassie Daley Department Chair, Mendoza College of Business, University of Notre Dame.





"Great job! This book provides a unique perspective on the fundamentals of institutional trading absent from any other book. The book is a great starter for anyone interested in being part of a trading desk and also provides PMs and analysts with a solid foundation on trading."



- Enrico Cacciatore, Senior Quantitative Trader and Head of Market Structure & Trading Analytics, Voya Investment Management





"This book is one of the best and most practical guides to Algorithmic Trading out there. Through clear examples and concise explanations, it provides a powerful overview of the most relevant algorithms in use today. This book should be on the mandatory reading list for anyone involved with systematic execution - it is on ours."



- Anton Katz, CEO and co-founder of Talos Trading and former Head of Trading Technology, AQR.





"Algorithmic Trading is one of the select few books that is both conceptual and practical. The content synthesizes Jeff's vast experiences working at the NYSE, leading brokerages and a sophisticated quant fund, as well as currently consulting numerous institutional clients at all stages of the investment process. There are earlier excellent publications on this topic as well, but as global markets constantly evolve the reader will undoubtedly benefit from the up-to-date information and also from a thought-provoking overview of explosive market electronification across asset classes and geographies over the past two decades.



Being a current practitioner in the field as well as an educator, I thoroughly enjoyed the book's intuitive framework and the healthy dose of concrete and thoughtful examples. Numerous issues/caveats/pitfalls that any algo quant faces while developing modern trading strategy are carefully listed and discussed. A broad audience will enjoy the book, and I think it will be especially valuable to any junior quant coming out of school with an advanced degree, who, after a brief first glance may think building a trading strategy is rather trivial. It is not, far from it in fact. Literally every decision is a trade-off which needs to be understood, calibrated, and also maintained going forward, ideally via some dynamical self-correcting mechanism. This book helps understand the set of problems and common solutions taken by practitioners. I was also happy to read through chapters dedicated to evaluation of trading strategies. The book dispels a host of misconceptions, crude simplifications, and offers the reader a clear sound framework."



- Dmitry Rakhlin, Head of Systematic Trading / Portfolio Manager, Goldman Sachs Asset Management and Adjunct Professor, Baruch College.