Alpha Trading: Profitable Strategies That Remove Directional Risk - Hardcover

Kaufman, Perry J.

Hardcover

ISBN 10: 0470529741 ISBN 13: 9780470529744

Publisher: Wiley, 2011

Synopsis

From a leading trading systems developer, how to make profitable trades when there are no obvious trends How does a trader find alpha when markets make no sense, when price shocks cause diversification to fail, and when it seems impossible to hedge? What strategies should traders, long conditioned to trend trading, deploy? In Alpha Trading: Profitable Strategies That Remove Directional Risk, author Perry Kaufman presents strategies and systems for profitably trading in directionless markets and in those experiencing constant price shocks. The book

• Details how to exploit new highs and lows
• Describes how to hedge primary risk components, find robustness, and craft a diversification program
• Other titles by Kaufman: New Trading Systems and Methods, 4th Edition and A Short Course in Technical Trading, both by Wiley

Given Kaufman's 30 years of experience trading in almost every kind of market, his Alpha Trading will be a welcome addition to the trading literature of professional and serious individual traders for years to come.

About this title

From the Back Cover

PRAISE FOR
ALPHA Trading

"Perry Kaufman's ability to make complex ideas understandable and his keen understanding of the markets of today is on display in this excellent book. We are, indeed, into new territory in trading and Alpha Trading is the first book I have seen to embrace the reality of this new era and to put forth specific strategies appropriate for today and for the markets ahead of us."
―JEFF QUINTO, President, Electronic Futures Trader Inc.

"Alpha Trading helps investors pursue steady returns in volatile and uncertain markets. Kaufman offers an important addition to the literature on diversification and controlling risk, and makes the process simpler with the creation of a stress indicator that provides a better approach to entry and exit timing."
―MASATOSHI MUTO, President and CEO, Mizuho Alternative Investments, LLC

"As always, Perry Kaufman manages to explain advanced quantitative trading strategies in an approachable and interesting way. This book is an excellent introduction to the world of systematic alpha trading and readers are rewarded with many practical examples as well as the long-term trading experience of one of the most knowledgeable experts in the industry. A highly recommended read for anyone with an interest in the field."
―MORITZ SEIBERT, Head of Equity Structuring for the Americas, RBS

"Another must-read book from Perry Kaufman. For anyone who hopes to be successful in this industry, Perry's demonstration of the understanding of risk and volatility, using strategies that have a sound rationale behind them, is essential reading. Highly recommended.
―THOMAS MORROW, Principal, Aquantum SARL

"A new great book by Perry Kaufman. Full of practical and original ideas on how to design, test, and implement market neutral strategies. Only a few pages after you start reading, you feel the need to start testing and adapting strategies to your own trading."
―JORGE BOLIVAR, CEO, TechRules.com

"The concept of alpha trading is well thought through and gives the reader an excellent toolbox for other strategies, especially in risk management applications. We will be using the alpha trading concept for our new stock selection approach based on the systematic evaluation of intangible assets of companies."
―CARSTEN LUND, Managing Partner, ARIAD Asset Management

"With this succinct and remarkably lucid guide to statistical arbitrage, Perry Kaufman shows investors how to profit without taking market risk. Individual investors, as well as seasoned professionals, will benefit from Kaufman's broad ranging experience and outstanding communication skills."
―MARK KRITZMAN, President and CEO, Windham Capital Management

From the Inside Flap

In the fall of 2008, the investment world received a rude reminder that forecasts and risk have more uncertainty than we would like to believe. From August 28 to the following March 9, the S&P 500 dropped 47%. Even more remarkable was that every investment was dragged down with it--hedge funds that were expected to offer diversification, commodity funds, real estate, art, and of course, every possible stock in nearly every country. When a market like this comes along, what is a trader to do? How to manage risk? Where are the hedges?

The solution to all this risk and uncertainty, says world-renowned trading systems expert Perry Kaufman, is to take market positions that are not exposed to directional risk. Trading a spread or market neutral position takes price shocks out of the picture completely. In Alpha Trading, Kaufman shows how to make trading profits even when there are no market trends and price shocks rock the markets every day. His strategies, long shown to be profitable, are called statistical arbitrage, or stat-arb, and they can be traded by holding positions for a few days, as he suggests, or for milliseconds as implemented by the big investment houses. They include all forms of stat-arb trading, from spreads to yield-curve trading to program trading, and from the simplest pairs trade to large-scale market neutral strategies. Kaufman covers each one in detail, ultimately showing you how to change the shape of your risk and drastically increase your probability of profiting under any market conditions.

With his decades of experience in almost every type of market, Kaufman's guidance, strategies, and lessons will be a welcome addition to the trading literature for professional and serious individual traders for years to come.

A companion website includes spreadsheets to perform the calculations found in the book, including those for pairs trading, risk-adjusted spreads, cross-market trading, traditional market neutral trading, and other stat-arb methods.

Alpha Trading will help serious investors and traders make money when markets make no sense. With tested strategies and systems for profitably trading in directionless markets, Kaufman shows traders how to exploit new highs and lows, hedge primary risk components, find robustness, craft a diversification program, and much more, complete with spreadsheets to do the calculations. Each step of the process is explained and illustrated with examples of how the numbers should look.

Edition details

• Publisher: Wiley
• Publication date: 2011
• ISBN 10: 0470529741
• ISBN 13: 9780470529744
• Binding: Hardcover
• Language: English
• Edition number: 1
• Number of pages: 320