The laws of trading : a trader's guide to better decision-making for everyone / Agustin Lebron ; foreword by Aaron Brown.

Every decision is a trade. Learn to think about the ones you should do-and the ones you shouldn't. Trading books generally break down into two categories: the ones which claim to teach you how to make money trading, and the memoir-style books recounting scandals and bad behavior. But the former...

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Bibliographic Details
Main Author:	Lebron, Agustin, 1976- (Author)
Other Authors:	Brown, Aaron, 1956- (Author of introduction, etc.)
Format:	eBook
Language:	English
Published:	Hoboken, New Jersey : John Wiley & Sons, Inc., [2019]
Subjects:	Investment analysis. Investments > Decision making. Business enterprises > Finance. Corporations > Finance. BUSINESS & ECONOMICS > Finance. Corporations > Finance Business enterprises > Finance Investment analysis Investments > Decision making
Online Access:	Click for online access

Table of Contents:

Cover
Title Page
Copyright
Contents
Acknowledgments
Foreword by Aaron Brown
As old and as true as the sky
Introduction
What Is Trading?
Why Study Trading?
What Are Financial Markets?
Vested Interests
Who This Book Is For
What This Book Will Not Do for You, and What It Will
Why Laws?
References
Chapter 1 Motivation
Why Are You Trading?
Shouldn't This Chapter Be Short?
Greed and Fear
Boredom
The Zone
Risk Seeking
Wanting a Big Score
Intellectual Validation
Why Does Motivation Matter?
Make Peace with Your Motivations, or Change Them
The Role of "You"
Protecting Ourselves
Making "You" Small
Caring about the Right Things
Precommitment and Hindsight
Self-Knowledge and Precommitment in Other Contexts
Buying a New Car
Navigating the Job Market
Precommitment for Self-Improvement
Summary and Looking Ahead
References
Chapter 2 Adverse Selection
An Information Theoretic View of Trading
A Holy War among Statisticians
Having Beliefs and Updating Them
Using Our Updated Beliefs
After the Trade
It's All Bayes, All the Way Down
Markets and Society
A Paradox: Why Does Anyone Trade at All?
Special Trades
Keeping Your Head When Others Are Losing Theirs
Adverse Selection in Other Financial Markets
IPOs
Rights Issues
An Extra Special Rights Issue
Adverse Selection in Everyday Life
eBay and the Winner's Curse
Store Sales and Specials
Job Market
Insurance
Summary and Looking Ahead
References
Chapter 3 Risk
What Do We Mean by Capital?
Self-Financing Portfolios
Collateral and Capital
Being Right and Losing Anyway
Risk and Hedging
What Is Risk?
VaR and the Mismeasure of Risk
Gaming the Measure
What Sorts of Risks Are There?
Evaluating and Measuring Risk.
Top-down Risk
Bottom-up Risk (A Worked Example)
Risk Systems
The Varieties of Market Risk
Identifying Risks
Optimizing the Hedge
Risk, Utility, and Catastrophic Risk
Risk in Everyday Life
Insurance
Job Offer Decisions
Useful Paranoia and Natural Hedges
Summary and Looking Ahead
References
Chapter 4 Liquidity
Liquidity Is in the Eye of the Beholder
Size
Frequency
Uniqueness
Transparency
Heterogeneity
Risk and Liquidity
Buy FITB Shares
Buy FITB Single-Stock Future
Buy FITB Calls
Sell FITB Puts
Buy XLF
Buy SPY
Conclusion
Liquidity in a Broader Context
Memberships and Contracts
Housing
The Job Market
Finding Liquidity
Buying a Car
The Rise of Amazon
Summary and Looking Ahead
Bibliography
Chapter 5 Edge
What Is Edge?
Understanding and Acting
Marginal Traders, and Why They're the Only Ones that Matter
Telling Stories
Biases Big and Small
Overconfidence Bias
Confirmation Bias
The Competitiveness of Financial Markets
Are Stories Really Necessary?
Constructing Reasons
Creativity
Persistence
Quantitative Review
Qualitative Review
Practicality
Go Try It
The Nature of Real-World Edges
The German Tax Dividend Trade
When Edges Break
Edges in a Broader Context
Edges in the Workplace
Your Personal Edge
Summary and Looking Ahead
References
Chapter 6 Models
Some Light Philosophy
What Should Models Be?
Scary Generative Models
Scary Phenomenological Models
Disagreements about Scariness
Useful Simplifications
An Example from High-Frequency Trading
Putting the Cart before the Horse
Characteristics of Good Models
Robustness
Hardware, Software, and Wetware
Inspectability
Data Management and Model Building
Data Scarcity
How Much Data Is Necessary?
Partitioning the Data
The Process of Building Models
Development versus Production
When Models Break
How Much Variation Is Expected?
Assessing Strategy Changes
A General Approach
Models in the Real World
Humans Are Model-Building Machines
Models of the World
Models of Other People
Models of Ourselves
Summary and Looking Ahead
References
Chapter 7 Costs and Capacity
Introduction
Categorizing Costs
Quadrant 1: Visible Linear Costs
Quadrant 2: Visible Nonlinear Costs
Quadrant 3: Invisible Linear Costs
Estimating Depreciation Rates
A Little-Appreciated Fact about Trade Depreciation
Quadrant 4: Invisible Nonlinear Costs
Herding
Accounting for Herding Risk
Opportunity Cost
Unknown Unknowns
Bell Labs and the Sociology of Innovation
The Landscape of Trades
Overestimating Profitability
Underestimating Cost
The Ownership of Trades
Summary and Looking Ahead
References
Chapter 8 Possibility
Six Impossible Things before Breakfast
Logical Possibility
Physical Possibility
The Inductive Hypothesis
What's Special about Today?
Induction in Financial Markets
Feedback Systems and Their Stability
A Normal Market in a Stock
A Bigger Trade
The Squeeze
Some Comments
The Anti-Inductive Behavior of Markets
Correlations and Low-Probability Events
Correlations and the Financial Crisis of 2007-2008
Aftermath
Probabilities and the Effect of Correlation
Practical Techniques for Evaluating Possibilities
Taking It up a Notch: Bet on It
Some Historical Episodes
Portfolio Insurance and the 1987 Market Crash
Incinerating Money in Japan: The Dentsu IPO
"Impossible" Events in 2008
The Chief Unpegs
Summary and Looking Ahead
References
Chapter 9 Alignment
The Ballad of Victor Niederhoffer
Roles
Capital.

The laws of trading : a trader's guide to better decision-making for everyone / Agustin Lebron ; foreword by Aaron Brown.

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