Wednesday, April 22, 2009

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

About 180 pages that is an easy read for anyone with some trading knowledge.  Chan has a great background and a lot of experience that show throughout the book.

Chan uses MATLAB examples to show how software tools can be used to backtest and automate trading strategies.

He also has several examples including a 'Mean-Reverting Model' and a 'Pair Trading' system.  Both have very good Sharpe ratios and appear very straightforward.

Chan's chapter on backtesting and his use of MATLAB for measuring risk and leverage were also very interesting.

My takeaway from the book includes:

1.  I will look into Octave, a MATLAB clone, to see if I can adopt it instead of writing all of my own backtesting software from scratch.

2.  I am always looking for another system to complement what I am doing today.  I have looked at 'Pair Trading' in the past and will use Octave and Chan's example to revisit my previous work.

I liked the book and can easily recommend it.  I can also recommend Chan's blog at http://epchan.blogspot.com/.