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Alpha Trading: Profitable Strategies That Remove Directional Risk Hardcover – Mar 8 2011

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Most Helpful Customer Reviews on (beta) 4 reviews
2 of 2 people found the following review helpful
Buy this book if you think about developing non-directional strategies Jan. 4 2013
By Dr. Ulbrich - Published on
Format: Hardcover
There has been hype on non-directional risk strategies, pairs trading and hedge funds in the recent years. This hype has produces a big number of content less books and articles.

This book stands out from these "hype literature" books because it delivers substantial value for people who want to develop non-directional strategies. It helps you to solve a lot of the issues you might have in developing a non-directional strategy in a very practical way.

This book is a must read for the serious non-directional risk strategy developer.
7 of 11 people found the following review helpful
Quantitative Trading Strategies Oct. 29 2011
By Amazon Customer - Published on
Format: Hardcover
Alpha Trading: Profitable Strategies That Remove Directional Risk by Perry Kaufman
Reviewed by Larry Lovrencic

The world has experienced many financial crises, from the South Sea bubble in the early 18th century to the Great Depression in early 20th century to the Dot Com Crash in the early 21st century to the housing and credit crisis in more recent years. It was the latter two crises which prompted author Perry Kaufman to consider alternative financial markets trading strategies which required more complex positions other than just long or short but which he suggests rewards the trader with safety during a market collapse. The result of Kaufman's deliberations is the book Alpha Trading : Profitable Strategies That Remove Directional Risk.

According to Kaufman the focus of this book is on the active trader and the trading strategies employed are called Statistical Arbitrage or StatArb, which is the trading basis of many of the large hedge fund managers throughout the world. Statistical arbitrage is a market neutral trading method where a trader takes advantage of the expected mean reversion of the relationship between two co-integrated securities. Effectively, by cancelling out Beta (the overall market's contribution to a security's return) and trading Alpha (the active return of a security), a trader can feel confident during extremely volatile periods of market activity. In this book, Kaufman takes the reader on a journey through formulae and examples to illustrate effective methods for achieving trading returns with lower risk profiles.

The book begins by examining the importance of price noise in a market with Kaufman examining the 'drunken sailor walk' and the efficiency ratio and quickly moves to a substantial section on the process of trading pairs of securities, initially equities and then futures. Examples are thorough and provide a good basis to understanding the process. Sample spreadsheets are provided on a website link referred to in the book.

In the next chapter Kaufman examines longer term pairs trading where price noise is usually not dominant and where well defined trends tend to emerge. The relationships between Dell and Hewlett-Packard and gold and platinum are used as examples. Cross market trading is also examined with a focus on the use of the 'stress indicator'.

Alpha Trading, is similar to Kaufman's previous books, New Trading Systems and Methods and A Short Course in Technical Trading, in it's examination of the quantitative aspects of trading but departs by not using Technical Analysis as the focus of the strategies. It provides well explained, robust methods for traders considering alternative quantative trading strategies.
5 of 11 people found the following review helpful
hugely disappointing June 5 2011
By Varun - Published on
Format: Hardcover Verified Purchase
the book is excessively verbose and low on content. if you're purchasing this after reading Kaufmann's last book, dont ! you'll be disappointed.
6 of 14 people found the following review helpful
Well written, practical trading book March 23 2011
By TacticalOptions - Published on
Format: Hardcover Verified Purchase
This is a very well written, practical trading guide for novice and experienced pairs traders. It's great for new traders because it doesn't include any hype or build expectations of achieving exceptional returns with ease. It's a good study for experienced traders because it is very detailed and includes the Excel worksheets for the indicators. Kaufman even sent me the EZ Langauge code for a TradeStation indicator.

Kenneth Roberts
Fusion Asset Management