Algorithmic Trading & DMA

By: Barry Johnson

This book is used for the Security Trading & Market Making course at the Kelley School of Business (Indiana University). Therefore, Algorithmic Trading & DMA will always have significance here at The Stock Trader Blog.

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Overview

In this book, Barry Johnson gives a detailed description of the history of financial markets. He analyzes different types of markets and discusses attributes of each type. Market microstructure, or how markets function based on the characteristics of their mechanisms, is one of the primary focuses of the book.

It is possible to become a successful trader or investor without an expert understanding of topics like hybrid markets, exotic order types, and VWAP strategies (volume-weighted average price). However, such specialized knowledge can certainly enhance a trader’s probability of success. For that reason, this book should be used as an additional resource for financial market participants.

Some of the applications discussed by Johnson are only used by institutional investors. Even if the reader is not planning on being in the institutional investor role at some point in the future, understanding the operational differences between retail and institutional trading is still beneficial to retail traders. Institutional traders have significant influence on day-to-day price movements in markets. Retail traders would likely fare better with a comprehensive education of institutional strategies and actions.

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