Real Time Risk Review
Author: Irene Aldridge and Steve Krawciw
Subject: Fintech and Intra-day Risk
Audiobook: Not available
First Published: 2017
Who’s it for: Professional traders or Risk Managers or anyone with an interest in market structure and participants
Reputation: Brand new, but the authors are widely respected
The Good: Fascinating topics
The Bad: If you want more info, you’ll need to become a client!
Recommendation: Must read if you work in Risk, very interesting if you are a regular trader
Buy it HERE.
Real Time Risk – Overview
Real Time Risk is a pleasure to read but a pain to review. It is a fascinating book, and anyone who has even a passing interest in market structure or the identity and machinations of market participants will love this book. But it is hard for me to recommend it as a must-read for the regular retail trader; you could probably get along just fine without the depth of information that this book goes into.
For instance, a big part of the book is concerned with how to anticipate flash crashes. As Aldridge said in our recent interview – the retail trader may as well just ignore flash crashes; the price usually comes back anyway. Just don’t get margin called!
So, maybe your $5000 or even $50,000 account trader or investor doesn’t need this book. But if someone writes a book telling you how to predict flash crashes and you aren’t even interested then I doubt there is much about trading that does interest you at all!
Impressive Breadth and Depth
You can read this book in two ways. By reading the text and ignoring the tables – just taking the authors’ conclusions at face value, or by studying and analysing the data they present for yourself. The path you choose will likely depend on your role in the markets. If, like me, you are a regular retail trader with a modest trading account, then you probably won’t be reading every line of data in the tables. But if you are a risk manager, or professional execution trader then there is another layer or detail here that you are going to want to understand.
Both the breadth and depth of this book are impressive. The depth is probably a fraction of what is available to Able Markets clients (the authors run Able Markets, a big data analytics consultancy for market participants), but it is perfectly sufficient for the retail trader or home investor.
The breadth is remarkable – this two hundred page book covers most of the big issues in Fintech in 2017 but still manages to have a coherent message, that here is real intraday risk posed by advances in technology, but there are ways to protect yourself.
The authors understand what gets a reader’s attention. They hit on some of the sexiest topics currently exercising the trading literati:
- The coming settlements revolution
- High Frequency Trading – HFT
- Do they front run you?
- How do they manipulate Dark Pools?
- Do they cause flash crashes?
- Is economic data being leaked to HFT traders?
- Social Media
- Can social media aggregation predict stock price movements?
- Can it predict election outcomes?
- Does Fintech increase intra-day risk?
- How can I protect myself against this?
No matter your level of knowledge of these areas, there are some insights shared here that you simply won’t be able to find elsewhere. As an example, the data that the authors present on aggressive HFT trading in the hour prior to economic data releases in the US comes very close to proving that they simply must be getting their hands on the data early! Long suspected but never proven, this is a topic that will make many retail traders sit up and pay attention.
Real Time Risk Review – Conclusion
This book is fascinating, and it is credit to the authors that they are able to so elegantly explain such a wide range of topics in appropriate depth, despite their day job being as data scientists, not writers! Having co-authored a number of books together, however, it is not surprising that Aldridge and Krawciw have managed to successfully twin a light-touch writing style with serious data. They have made a topic driven by statistics a pleasure to read about, which is an achievement all of its own.
If you manage a significant amount of money, are a professional execution trader, or work in Risk you must this book. If you are remotely interested in the markets and stake your personal wealth on your trading activity then I am confident that you will find this book fascinating.
Buy Real Time Risk HERE.