Mastering the Art of Equity Trading Through Simulation, + Web-Based Software The TraderEx Course
by Schwartz, Robert A.; Sipress, Gregory M.; Weber, Bruce W.Edition: 1st
Format: Paperback
Pub. Date: 2010-07-06
Publisher(s): Wiley
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Summary
The TraderEx Simulation Course is a guidebook to interactive computer simulation designed to provide participants with hands-on experience in making tactical trading decisions and implementing them in different market environments including continuous order drive markets, quite driven, dealer markets, call auction markets, and block trading markets, among other market variations. By operating in these different markets, the player comes to understand a good deal about what trading involves and how market design impacts trading decisions. The simulation captures the time element involved in trading, and prices in the simulation move with startling velocity in brief intervals of time, just as they do in real markets. As prices change, trading opportunities can appear and vanish. This book provides a virtual platform that gives users hands-on experience in making tactical trading decisions, shows exactly how prices are established in the marketplace, teaches users how the structure of a marketplace influences participant decisions (not all markets operate the same), and is an excellent source of self-teaching or student exercises.
Author Biography
Robert A. Schwartz is Marvin M. Speiser Professor of Finance and University Distinguished Professor in the Zicklin School of Business, Baruch College, CUNY. He is the developer, with Bruce Weber and Gregory Sipress, of the trading and market structure simulation, TraderEx. Gregory M. Sipress is the head of software development at TraderEx, LLC. Bruce W. Weber is a Professor of Information Management at the London Business School.
Table of Contents
| Foreword | p. ix |
| Preface | p. xi |
| How TraderEx Works | p. xii |
| Who This Book is For | p. xiii |
| Overview of the Book | p. xiv |
| Downloading the TraderEx Software | p. xvii |
| How TraderEx Works with Micro Markets | p. xvii |
| Acknowledgments | p. xix |
| An Overview of Equity Market Trading | p. 1 |
| Equity Market Trading | p. 3 |
| The Costs of Trading | p. 5 |
| Liquidity | p. 8 |
| Market Structure | p. 9 |
| Informational Efficiency (or the Lack Thereof) | p. 11 |
| Expectations | p. 14 |
| The Players | p. 16 |
| Summary | p. 18 |
| Simulation as a Learning Tool | p. 19 |
| Canned versus Computer Generated Prices and Quotes | p. 19 |
| Appendix: Inter-Temporal Returns Correlation | p. 33 |
| Summary | p. 37 |
| How to Use TraderEx | p. 39 |
| An Overview of the TraderEx Environment | p. 40 |
| The Continuous Order Book Market | p. 45 |
| The Dealer Market | p. 63 |
| Call Auctions | p. 67 |
| Block Trading Facility | p. 70 |
| Crossing Network | p. 77 |
| Hybrid Markets | p. 78 |
| Summary | p. 81 |
| Introduction to the Trading Exercises | p. 83 |
| The Buy-Side Perspective | p. 84 |
| The Sell-Side Intermediary Perspective | p. 93 |
| TraderEx Performance Measures | p. 96 |
| Summary | p. 104 |
| TraderEx Exercises | p. 105 |
| Microeconomics Goes to Market | p. 107 |
| The Look of a Financial Market | p. 108 |
| What Are Your Attitudes Toward Risk? | p. 114 |
| Call Market Trading | p. 117 |
| Trading Costs in Action | p. 123 |
| Dealer Costs and Inventory Control | p. 126 |
| Inter-Market Competition for a Stock Exchange | p. 128 |
| Finding and Equilibrium Value | p. 131 |
| Economic Effects of an Order Protection Rule | p. 133 |
| Conclusion | p. 135 |
| The Order Book Market Structure | p. 137 |
| Entering Limit Orders | p. 138 |
| Entering Market Orders | p. 141 |
| Adjusting Limit Orders | p. 142 |
| Sizing your Orders-Markets and Limits | p. 144 |
| Post-Trade Analysis | p. 147 |
| A Really Big Order | p. 149 |
| Another Really Big Order | p. 157 |
| Illiquidity | p. 157 |
| Heightened Volatility | p. 159 |
| News and Changing Expectations | p. 162 |
| Endogenous Expectations | p. 165 |
| A One-Year Holding Period | p. 166 |
| Crossing Networks | p. 167 |
| A Networked Simulation | p. 168 |
| Conclusion | p. 172 |
| The Call Auction Market Structure | p. 173 |
| The Price Setting Mechanism in TraderEx Call Auctions | p. 174 |
| Mechanics of the Opening Call Auction | p. 182 |
| Your TraderEx Call Auctions Orders | p. 186 |
| Your Influence on TraderEx Call Auction Prices | p. 186 |
| Participating in the Opening Call Auction | p. 191 |
| Working a Large Order with Call Auctions | p. 192 |
| Proprietary Trading with Call Auction, and News Releases | p. 206 |
| Emphasizing Different Dimensions of Trading Performance | p. 207 |
| Alternative Call Structures: A Partially Disclosed Call Auction and a Time Priority Call Auction | p. 208 |
| Conclusion | p. 211 |
| Dealer Markets: What Do the Trading Intermediaries Do? | p. 213 |
| Operations of Quote Driven Markets | p. 214 |
| Changing Quotes to Control your Inventory | p. 219 |
| Market Maker Performance | p. 221 |
| Market Maker Risk Performance | p. 223 |
| Preferencing in Market Maker Systems | p. 225 |
| Volatility and Market Making | p. 228 |
| Low Liquidity and Market Making | p. 229 |
| Alternative Trading Systems and Market Making | p. 233 |
| Conclusion | p. 234 |
| Dark Pools: How Undisclosed Liquidity Works | p. 235 |
| Mechanics of the Dark Pool | p. 240 |
| Seeking Advantages from Dark Pool Pricing | p. 242 |
| Working a Large Order with a Dark Pool | p. 244 |
| Proprietary Trading with Dark Pool, and News Releases | p. 246 |
| Emphasizing Different Dimensions of Trading Performance | p. 247 |
| Dark Pools and Trade-Through Rules | p. 249 |
| Conclusion | p. 250 |
| About the Authors | p. 251 |
| Index | p. 253 |
| Table of Contents provided by Ingram. All Rights Reserved. |
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