Quantitative Trading: How to Build Your Own Algorithmic Trading Business (Wiley Trading Book 381) BY ERNEST P. CHAN

Quantitative Trading: How to Build Your Own Algorithmic Trading Business (Wiley Trading Book 381) BY ERNEST P. CHAN

About the book

Ernest P. Chan teaches quantitative trading and shows how an individual trader can be proficient in this type of trading and actually succeed in it. In the current market where rich, proficient investors rule the game, allowing almost not space to beginning traders, Chan teaches how novice traders can beat professionals at their own game. 

This book is highly recommended for those who want to learn quantitative trading and apply it to real-life, whether you are an individual trader or looking to build a business out of it.


This book is highly recommended for traders with a background in computer science and mathematics. It quickly delves into quantitative trading, which is why it is extremely useful if the reader already knows his way around the topic. The book is filled with many technical terms and codes that normal readers may have a hard time understanding, which is why it is important to have a background first, especially on MATLAB. 

The book discusses in great detail the processes in quantitative trading using simplified language at the most, except for the necessary jargon. It is a good resource for someone looking for an introductory text to quantitative trading, and the inclusion of MATLAB is a plus, especially if you have lost touch with it. 

About the Author

ERNEST P. CHAN is a professional when it comes to applying statistical models and software for trading stocks, currencies, and futures. He offers training courses on trading through workshops or consultations. Chan created and traded various quantitative models for hedge funds and investment banks in the past. He has served individual and institutional clients all over the world. 

Table of Contents



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


Appendix: A Simple Derivation of the Kelly Formula when Return Distribution Is Gaussian

CHAPTER 7 Special Topics In Quantitative Trading

Mean-Reverting versus Momentum Strategies

Regime Switching

Stationarity and Cointegration

Factor Models

What Is your Exit Strategy?

Seasonal Trading Strategies

High-Frequency Trading Strategies

Is It Better to Have a High-Leverage versus a High-Beta Portfolio?


CHAPTER 8 Conclusion: Can Independent Traders Succeed?

Next Steps

Appendix A Quick Survey of MATLAB


About the Author