Algorithmic Trading and Books: My Recommendations for Those Interested in Automated Trading Strategy Use and Development

I have always stressed the importance of having reliable information when building a knowledge base to succeed in trading. It is no secret that information available online is often from unreliable and anonymous online sources which might – and often do – have less experience than the person interested in reading the information they have to offer. I have always believed that books from recognized authors who have a better idea of what is going on are a much better source of information than the online “hype” and therefore reading this type of material has always been one of my most frequent recommendations. Despite this fact I have never actually talked about which books I like and recommend to new traders so I decided to write an article today about this issue. On today’s post you’ll be able to learn more about which books I would recommend to people interested in learning more about automated trading.

Now let’s be clear about something from the start. As far as I could see there are no books dealing with the creation, design, evaluation and use of automated trading systems for the Forex market on the retail market – should I write a book guys? – and therefore the material you will find on all the books I will recommend was not particularly made for or thinking about Forex but many of the concepts introduced are nonetheless useful for anyone interested in algorithmic trading as a retail Forex trader. The books have very important concepts dealing with system design and testing but many of the practical aspects will need to be adjusted by the reader to fit the Forex market. Certainly important issues like broker dependency type stress tests are not taken into account – since they are not an issue in futures and stocks – so you need to understand the differences and apply whichever information can be extended over all markets.

Another very important thing I want to stress here is that you should NOT go to a website and buy all the book right away since you may simply be wasting your time and money by doing so. If you want to read some of the books then I would recommend you do this in a one-by-one basis and this way you will not have a “to-read” pile which will often make reading harder than easier. The most important thing is to work in a read and apply basis where you read a book and start applying at least some of what you have learned before you move onto the next one. You are not just going to get these books to say you “read them” but you are going to get this books to gain an education so application before “massive information gathering” is a priority. You’re not in this to become an encyclopaedia but to apply whichever useful concepts you learn! I will talk about the books in the order in which I suggest you read them so please take this into consideration (of course, not set in stone).

Now let us get into some of the books I would recommend. My first recommendation would be “Trading System Explained” by Martin J.Pring. through his book the author goes into many basic aspects of strategy development and gives a good view of how he develops his strategies in a reliable way. The author is not the best writer however and you may get a little bit lost at times, also the book would probably not be good to someone very new to trading although it is a good match for someone who has already been confronted with trading but wants to get into its algorithmic side. The book is not very advanced in this regard but does expose some very valid concepts in trading which are a worthy read for most people new to algorithmic trading. It could very well serve as a basic foundation for people interested in mechanical trading.

My second recommendation “An Introduction to Algorithmic Trading” by Edward Leshik and Jane Cralle is a fairly new book which talks about the foundations of algorithmic trading and the application of this trading technique demonstrated through the showing of live-used mechanical trading techniques. The book is no “great revelation” but for a new trader it shows key aspects of mechanical trading system development and exemplifies them quite good with trading strategies which are in fact being executed on a live trading basis. Most “coding” on this book is done in excel so for those a little bit shy at programming it may provide an “easier route” to get into this world. In summary another “core book” which might be useful for someone just getting into this game.

One of my favourites “Evidence-Based Technical Analysis” is a book by David Aronson which attempts to tackle automated trading from a “scientific-like” perspective. The book introduces the user to the scientific theory and applies them to the development of algorithmic strategies through the use of several statistical analysis techniques and sound system development tactics. I especially like the way in which the author talks about statistics which I think is a very good introduction to people new to algorithmic traders. When I say “learn statistics” I believe this book provides a solid starting ground for the necessary knowledge to apply this field of mathematics to the building and testing of mechanical trading system.

The final book I want to mention today “The complete guide to building a successful trading business” by Paul King is also a piece of material I would recommend since it gives you a good “course” on how to treat your trading and build your algorithmic career thinking about trading as a business. Although it doesn’t detail strategy building or design this book does give some very important notes about how you need to approach your trading and what things you need to take into account in order to build a solid and sound long term trading perspective. If you want to eventually live from trading then this book is probably a must read.

Of course there are many other books I like and many I would recommend just to learn more about Forex and trading in general but the above books are merely a small summary of which ones I consider most useful for those of you who are just getting into the algorithmic trading “game”. Sure, the above books won’t make you a profitable mechanical trader and they won’t give you holy grails to implement on MQL4 and become rich but they will give you some very important ideas about the field and the knowledge necessary to succeed within it. As I say before some knowledge about the Forex market is required to extrapolate many of the concepts and conclusions to this market but it can certainly be done after you start to apply and experiment with the presented concepts on the Forex market.

If you would like to learn more about my work in automated trading and how you too can earn a true education in this field please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach towards automated trading in general . I hope you enjoyed this article ! :o)

 

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16 Responses to “Algorithmic Trading and Books: My Recommendations for Those Interested in Automated Trading Strategy Use and Development”

  1. Franco says:

    Daniel,

    There is definatley an opportunity for you to write an algorithmic trading book, I would say go for it!

    Evidence Based Technical Analysis was a good book, but the level of detail for certain topics that are very important like Monte Carlo simulations are not enough.

    My search for a better explanation for Monte Carlo simulations is what brought be to this site in the first place :)

    • admin says:

      Hi Franco,

      Thank you for your comment :o) I believe you’re right in that the level of detail in most of these books is very reduced and users in the end can sometimes be more “confused” than “informed”. Perhaps – as you say – a book that explains things in much more detail will be much more worth it than a book which does not. Thanks again for the suggestions :o)

      Best Regards,

      Daniel

  2. McDuck says:

    another one (for stocks, but many ideas).

    New Trading Systems and Methods
    http://www.amazon.com/New-Trading-Systems-Methods-Wiley/dp/047126847X

  3. Vitor says:

    You already write for a magazine and write a post here everyday, why not a book about Algorithmic trading? :o)

  4. Chris says:

    Daniel-

    You should definitely write a book. You have enough material already and you could start with the material in your e-book, followed with the thought processes that followed as you developed each of your trading systems.

    Working in your favor would be the fact that MT4 is probably the most popular retail forex platform now and you probably have more orginal, useful content than anyone else out there.

    Working against you is the potential conflict between the material the already belongs to you via Asirikuy and which may become property of the publisher as a result of writing the book. I would suggest you need a good contact in the financial publishing industry plus some good legal advice before proceeding. I don’t have such contacts but I would throw it out to the Asirikuy community to see if anyone has any contacts.

    Once you are published (and deemed to be a success) you can join the money show circuit as an exhibitor give a talk on your material with the support of your publisher in support of your book and your service. Check out http://www.moneyshow.com/ to see what i’m talking about. Then you come to NYC and present at the Marriot Marquis and I can finally buy you a drink!

    Seriously though, you may be surprised how large the market is for usable financial information, and you have plenty. Its just a matter of finding the right contacts and mentors you to guys you along. Give it some thought since you already have what it takes.

    Chris

    • josh says:

      You definitely have what it takes….
      There is NOTHING out there about proper algorithmic trading in the forex market….. I have been looking, and there is absolutely nothing….
      You have something of real value to add, which is rare in the book writing business. Most of what is good out there is re-hashing, and I want go into what is truly bad and misleading, which there is much of. Not only do I think you could be a success, but I think that you could reach a larger audience, and could help a few more wanna be traders who don’t know what it takes to truly be successful…..
      There is not much truth out there, and you are one of the voices that can be trusted……..
      8^)

      • admin says:

        Hi Josh,

        Thanks a lot for your kind words :o) As you say part of the reason why I would want to write a book is that there is simply nothing out there that gives an explanation I would deem “useful and complete”. There is nothing about retail automated forex trading which is useful and certainly a book writen with “real value” – as you mention – would probably have a very positive impact in the trading world. This would also lead to a much larger audience something which is also not that good as it would greatly increase the burden trading puts on my life. Of course, all your points are very good and I will probably write such a book within the next few years :o) Thanks a lot for commenting !

        Best Regards,

        Daniel

    • admin says:

      Hi Chris,

      Thank you very much for your comment :o) Well that is certainly a tempting idea! However I do not know if I would like the idea of becoming that type of trader who goes around doing seminars and selling books. Truth be told traders who do this do not have a very good reputation and I would rather build up a track record for a bit longer- at least 5 more years – before moving into something of this sort. Certainly I would love to give a talk in NYC at the Marriot and have a good chat with you :o) As you say there is also the potential conflict between the book and Asirikuy so I would probably have to write a lot of new material so that I could keep both things separated to a good extent. This is obviously quite a gargantuan task and – as I said before – I might develop this idea slowly and release a book in a few years once I have enough new material for it as well as more time to write it :o) Thank you very much for your suggestion,

      Best Regards,

      Daniel

      PS: It would be great to know who in Asirikuy has publishing contacts ! :o)

  5. OKLA says:

    … and I would write the first translated version in german with a nice small team – just to give back some work you do for us :-)

    • OKLA says:

      ps: do you or anybody else also have a recommended book about trading psychology – as I think this is a VERY important topic, especially for long term systems.

      • admin says:

        Hi OKLA,

        Thank you for your comment :o) Trading Psychology is a greatly over-hyped subject. Yes, it is important to control your emotions but such control does not arise from any type of “psychological training” but from the confidence and understanding you have over what you’re doing. Build understanding and knowledge and psychological control will come as a simple consequence. Whenever you doubt a system this stems from your ignorance of how it trades and its statistical characteristics, the more you understand, the less you will fall to fear and greed. I hope this helps :o)

        Best Regards,

        Daniel

        • OKLA says:

          Hi Daniel,

          thanks for your comment… Maybe you are right, but anyway, knowledge about psychology is never bad in tradig, especially when you trade manually..

          Thanks again!

    • admin says:

      Hello OKLA,

      Thank you for your comment :o) That would be great !

      Best Regards,

      Daniel

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