An interactive guide to successfully trading in today'smarkets
Mastering the Art of Equity Trading Through Simulation isa guidebook to interactive computer trading simulation designed toprovide participants with hands-on experience in making tacticaldecisions and implementing them in different marketenvironments-from continuous order drive markets to call auctionmarkets, and from dealer markets to dark liquidity pools.
By showing traders how to operate in these different markets,this reliable resource quickly reveals a good deal about whattrading involves and how market design impacts tradingdecisions.
- Provides a virtual platform that gives users hands-onexperience in making tactical trading decisions
- Shows exactly how prices are established in themarketplace
- Teaches how the structure of a marketplace influencesparticipant decisions
Learning to trade through study is like learning about a rollercoaster ride verbally. You may get the idea of going up and downand around curves, but will lack the actual experience.Mastering the Art of Equity Trading Through Simulation willget you as close as possible to the markets-without actually goingin them-and prepare you to profit once you're really there.
About the Author
Robert A. Schwartz is Marvin M. Speiser Professor of Financeand University Distinguished Professor in the Zicklin School ofBusiness, Baruch College, CUNY. He is the developer, with BruceWeber and Gregory Sipress, of the trading and market structuresimulation, TraderEx.
Gregory M. Sipress is the head of software development atTraderEx, LLC.
Bruce W. Weber is a Professor of Information Managementat the London Business School.
Table of Contents
Foreword (Professor Dr. Reto Francioni).
How TraderEx Works.
Who This Book is For.
Overview of the Book.
Downloading the TraderEx Software.
How TraderEx Works with Micro Markets.
Part One: An Overview of Equity Market Trading.
Chapter 1: Equity Market Trading.
The Costs of Trading.
Informational Efficiency (or the Lack Thereof).
Chapter 2: Simulation as a Learning Tool.
Canned versus Computer Generated Prices and Quotes.
Appendix: Intertemporal Returns Correlation.
Chapter 3: How to Use TraderEx.
An Overview of the TraderEx Environment.
The Continuous Order Book Market.
The Dealer Market.
Block Trading Facility.
Chapter 4: Introduction to the Trading Exercises.
The Buy-Side Perspective.
The Sell-Side Intermediary Perspective.
TraderEx Performance Measures.
Part Two: TraderEx Exercises.
Chapter 5: Microeconomics Goes to Market.
Exercise 5.1: The Look of a Financial Market.
Exercise 5.2: What Are Your Attitudes Toward Risk?
Exercise 5.3: Call Market Trading.
Exercise 5.4: Trading Costs in Action.
Exercise 5.5: Dealer Costs and Inventory Control.
Exercise 5.6: Inter-Market Competition for a Stock Exchange.
Exercise 5.7: Finding an Equilibrium Value.
Exercise 5.8: Economic Effects of an Order Protection Rule.
Chapter 6: The Order Book Market Structure.
Exercise 6.1: Entering Limit Orders.
Exercise 6.2: Entering Market Orders.
Exercise 6.3: Adjusting Limit Orders.
Exercise 6.4: Sizing your Orders – Markets and Limits.
Exercise 6.5: Post-Trade Analysis.
Exercise 6.6: A Really Big Order.
Exercise 6.8: Illiquidity.
Exercise 6.9: Heightened Volatility.
Exercise 6.10: News and Changing Expectations.
Exercise 6.11: Endogenous Expectations.
Exercise 6.12: A One-Year Holding Period.
Exercise 6.13: Crossing Networks.
Exercise 6.14: A Networked Simulation.
Chapter 7: The Call Auction Market Structure.
The Price Setting Mechanism in TraderEx Call Auctions.
Exercise 7.1: Mechanics of the Opening Call Auction.
Exercise 7.2: Your TraderEx Call Auction Orders.
Exercise 7.3: Your Influence on TraderEx Call AuctionPrices.
Exercise 7.4: Participating in the Opening Call Auction.
Exercise 7.5: Working a Large Order with Call Auctions.
Exercise 7.6: Proprietary Trading with Call Auction, and NewsReleases.
Exercise 7.7: Emphasizing Different Dimensions of TradingPerformance.
Exercise 7.8: A Partially Disclosed Call Auction.
Chapter 8: Dealer Markets: What Do the Trading IntermediariesDo?
Operations of Quote Driven Markets.
Exercise 8.1: Changing Quotes to Control Your Inventory.
Exercise 8.2: Market Maker Performance.
Exercise 8.3: Market Maker Risk Performance.
Exercise 8.4: Preferencing in Market Maker Systems.
Exercise 8.5: Volatility and Market Making.
Exercise 8.6: Low Liquidity and Market Making.
Exercise 8.7: Alternative Trading Systems and Market Making.
Chapter 9: Dark Pools: How Undisclosed LiquidityWorks.
Exercise 9.1: Mechanics of the Dark Pool.
Exercise 9.2: Seeking Advantages from Dark Pool Pricing.
Exercise 9.3: Working a Large Order with a Dark Pool.
Exercise 9.4: Proprietary Trading with Call Auction, and NewsReleases.
Exercise 9.5: Emphasizing Different Dimensions of TradingPerformance.
Exercise 9.6: Dark Pools and Trade-Through Rules.
About the Authors.