The Equity Trader Course / Edition 1

The Equity Trader Course / Edition 1

by Robert A. Schwartz, Reto Francioni, Bruce W. Weber
     
 

If you are intent on enhancing your trading performance in today's markets, you must find a way to quickly exploit trading opportunities that arise from pricing inefficiencies as well as drive down costs associated with your trades.

In The Equity Trader Course, Robert Schwartz, Reto Francioni, and Bruce Weber—along with a number of industry leaders who have

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Overview

If you are intent on enhancing your trading performance in today's markets, you must find a way to quickly exploit trading opportunities that arise from pricing inefficiencies as well as drive down costs associated with your trades.

In The Equity Trader Course, Robert Schwartz, Reto Francioni, and Bruce Weber—along with a number of industry leaders who have contributed special pieces for the chapters of this book—provide a comprehensive course in equity trading for both the seasoned professional and serious independent trader. This detailed guide delivers key information on the dynamics of equity trading and shows you how to make the most of your time in the markets.

Filled with in-depth insights and practical advice, The Equity Trader Course examines:

  • The basic features of equity trading—fromorder arrival to the bid-ask spread
  • The importance and intricacies of liquidity
  • The use of limit and market orders
  • Order entry and trade execution in a continuous trading regime and a periodic call auction
  • The various roles of market intermediaries
  • The value of technical analysis and algorithmic trading
  • The complexity of performance measurement

Because the most valuable market lessons occur in the heat of the trading moment, this book's companion CD-ROM contains a computer-based simulation model, TraderEx, which gives you the chance to make hands-ontrading decisions and see the results live on your computer screen. These simulations help you hone your knowledge and decision-making skills before you put them to work in real-world situations.

Trading has never been an easy endeavor, but with The Equity Trader Course as your guide, you can learn how to make better decisions—as well as lower your costs—by becoming familiar with the dynamics of today's markets and the mechanics behind the trades you make.

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Product Details

ISBN-13:
9780471741558
Publisher:
Wiley
Publication date:
05/26/2006
Series:
Wiley Trading Series, #248
Edition description:
BK&CD-ROM
Pages:
410
Sales rank:
1,275,205
Product dimensions:
6.28(w) x 9.17(h) x 1.31(d)

Meet the Author

ROBERT A. SCHWARTZ is Marvin M. Speiser Pro-fessor ofFinance and University Distinguished Professor in the ZicklinSchool of Business, Baruch College, CUNY. Before joining the Baruchfaculty in 1997, he was Professor of Finance and Economics andYamaichi Faculty Fellow at New York University's Leonard N. SternSchool of Business, where he had been a member of the faculty since1965. Professor Schwartz received his PhD in economics fromColumbia University. He has published over fifty journal articlesand fifteen books, including Equity Markets in Action (Wiley),which he coauthored with Reto Francioni. He has served as aconsultant to various market centers including the New York StockExchange, the American Stock Exchange, NASDAQ, and DeutscheBörse, and has been an associate editor for several financejournals. In 1995, Professor Schwartz was named the first chairmanof NASDAQ's Economic Advisory Board, where he served until thespring of 1999.

RETO FRANCIONI has been the CEO of the Executive Board ofDeutsche Börse AG, since November 2005, and was president andchairman of the board of SWX Group. In 1993, Francioni joinedDeutsche Börse AG, where he was responsible for its entirecash market and later became its deputy chief executive officer.Earlier in his career, he was a director of the corporate financedivision at Hoffmann-LaRoche AG, Switzerland. Francioni has a lawdegree and PhD in law from Zurich University and is Professor ofEconomics and Finance at the Zicklin School of Business, BaruchCollege, CUNY.

BRUCE W. WEBER is Associate Professor ofInformationManagement at the London Business School, where heteaches information management and trading and financial marketstructure in MBA, master's, and executiveprograms. He has a PhD indecision sciences from the Wharton School of the University ofPennsylvania. His research on strategic uses of IT and thecomputerization of financial services has been published in anumber of academic journals, and he has consulted for a host offinancial services organizations. Prior to joining the LondonBusiness School in 2003, he was on the faculties of the SternSchool of Business–New York University and Baruch College,CUNY.

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Table of Contents

Foreword Alfred R. Berkeley III, CEO, Pipeline Trading SystemsLLC.

Preface.

CHAPTER 1 Getting a Grip on Trading.

Order Arrival.

The Bid-Ask Spread.

The Liquidity Dimension.

Overview of TraderEx.

Getting Started with TraderEx.

From the Contributors 38

Using Trading Simulations on an Academic Trading Floor: Wherethe Rubber Meets the Road (Richard D. Holowczak).

Reflections of a Finance Professor (Michael S.Pagano).

On-the-Job Training at Mako (David Segel).

CHAPTER 2 All About Liquidity.

From Information to Prices.

Defining Liquidity.

Liquidity and Transaction Costs.

Intraday Price Volatility, Price Discovery, andQuantity Discovery.

The Origins of Liquidity.

Illiquidity’s Footprints in the TransactionRecords.

Discussion.

From the Contributors.

Satisfying Institutional Traders’ Quest for Liquidity(Peter Jenkins).

Giving Customers Greater Choice in Trade Execution: The NYSEHybrid Market (John A. Thain).

Market Reaction to New Information (Claudio Werder andRené Weber).

CHAPTER 3 How to Use Limit and Market Orders.

The Order Book and the Market.

Order Types.

A Look at the Market.

A Reservation Price.

Cost of Placing a Limit Order.

Compensation for Placing a Limit Order.

Should You Submit a Limit Order or a MarketOrder?

How Should You Price Your Limit Orders?

The Bid-Ask Spread.

Handling a Large Order.

An Option Trader’s View of Limit Orders.

The Big Picture.

From the Contributors.

The Emergence and Growth of an Electronic Order-Driven Market(Gerald Putnam).

The Use of Limit and Market Orders (Rainer Riess and UweSchweickert ).

Order-Driven Markets: The Route to Best Execution(Jean-François Théodore).

Exercises 158

CHAPTER 4 Choosing between Continuous Trading and a PeriodicCall Auction.

How is a Call Auction Used?

Call Auctions and Market Structure.

Bookbuilding.

Order Handling Differences.

NASDAQ’s Crosses.

How to Submit an Order to a Call Auction.

A Reality Check.

Option Value of Limit Orders in a Call Auction.

Time to Call the Market.

From the Contributors.

A Call Is Not a Call Is Not a Call (Alfred R. BerkeleyIII).

The NASDAQ Crosses: A View from the Inside (Frank M.Hatheway).

Call Market Trading—It’s About Time (JamesRoss).

Exercises.

Appendix to Chapter 4: Further Details on ClearingPrice Determination.

CHAPTER 5 Market Intermediaries: Nuts ’n’ Boltsand Challenges.

Emergence of the Modern Markets.

Intermediation on the NYSE.

Intermediation at NASDAQ.

Overview of Market Maker Operations.

Order Handling and Transparency in a Dealer Market.

Competition and Preferencing.

Price Improvement.

The Future of Intermediaries in Hybrid Markets.

From the Contributors.

NASDAQ Market Makers in the NASDAQ Stock Market (RobertGreifeld).

Electronic Intermediaries for Block Trading (Martin Reck).

The Importance of Market Making (Frank L.Romanelli).

CHAPTER 6 The Road to Technical Analysis andAlgorithmic Trading.

Dynamic Price Discovery.

Quantity Discovery.

Technical Analysis.

Algorithmic Trading.

From the Contributors.

Algo History at TIAA-CREF (Paul L. Davis).

The Complexity of Market Information (John H.Porter).

The Mood of a Market (David Segel ).

Appendix to Chapter 6: Order Handling and MarketTiming on a Trading Floor.

CHAPTER 7 Performance Measurement.

Three Simple Performance Measures.

Transaction Cost Analysis.

Risk Management.

Best Execution.

Measuring the Performance of a Market Center.

Best Execution and Performance Reconsidered.

From the Contributors.

The Quest for Trading’s Holy Grail—Alpha! (MarcusHooper).

How Intelligent Traders Enhance Their Skills with a TCA Report(Wayne H. Wagner and Melissa Spurlock).

Appendix to Chapter 7: Explaining Risk Aversion.

APPENDIX Prices and Returns.

The Measurement of Returns.

Prices.

Returns.

The Intervaling Effect.

About the Authors and Contributors.

Notes.

About the CD-ROM.

Index.

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