June 22, 2006
There are a few books on trading that I recommend to other developers…
- Liar's Poker: Michael Lewis writes more generally about business these days, but this is about starting at Salomon as a grad in the 80s. Lots of belly laughs about the depravity of traders.
- FIASCO: in which Frank Partnoy confesses to his part in Morgan Stanley's derivatives shop in the mid nineties, and explains how his colleagues made your average estate agent look like a paragon of moral virtue. Funny and savage. If you enjoy Liar's Poker, you'll lap this up too.
- Education of a Speculator: Victor Niederhoffer worked with Soros and ran his own hedge fund until it blew up in the wake of the LTCM debacle in 98. A brilliant rebuttal of both technical analysis and random walk theories. Analogies with the weather, music and sports are examined and a theory of ever changing cycles presented.
- The Predictors: the quality of the writing could be better, but the story of how Packard and Farmer joined up with the O'Connor derivatives house to try and beat the markets with lots of processing power and some way out algorithms is fascinating. I think UBS are still running the codebase this book describes.
- Fooled by Randomness: an extended meditation on probability and randomness, how poorly they are understood by the public and most market practitioners, and how an awareness of them can be applied in a contrarian trading strategy. Like Soros, the author is a big fan of Karl Popper, especially his ideas on falsification. A delightful blend of anecdote and abstraction.