Everything you need to know to become a quant trader (top 5 books)

if you were able to read these four books and retain at least 25 to 40 percent of these four books you are without a doubt in my mind and in my friends minds completely capable of being a quantitative trader and breaking into the space now what the hell's up my disciples coding jesus here this is the long-awaited video the video you've all wanted me to make the video about which books you should read if you want to break into the space of quantitative trading now if you're currently a quantitative trader i think you'll still benefit from watching this video and if you are an aspiring quantitative trader this is definitely the video for you now where are my manners who the hell even am i my name is coding jesus i am a quantitative developer meaning i write server and client-side applications for traders at the quantitative trading firm or proprietary trading from rather that i work at now you're probably asking yourself what's a quantitative developer doing recommending me books on quantitative trading i am glad you asked while yes i am only a humble quantitative developer i do have a network of friends that are quantitative researchers and quantitative traders that work at places like jump trading and citadel i've reached out to these friends they've brought back a list of books that they believe that you will all benefit from and i have sifted through this list and selected the top five books that i would like to recommend to you if you want to break into this space now guys what i really don't like about the world of quantitative finance is that there are so many essays and books that are extremely dense they are very very hard to read through and i don't want to recommend those books to you and i won't be today because those books to be frank could be included in a cia torture program they're actually that hard to read and they won't actually help you land a job because they aren't practical they are the tip of the spear financial concepts that aren't going to be asked in an interview and they also won't be tested in the actual practical application or the battlefield of quantitative trading and by that i mean you won't be actually using those concepts on the job so without further ado guys let's get into my first book recommendation my first book recommendations under this massive pile of books if you guys know me you've known that i've recommended this book before it is option volatility and pricing by sheldon natenberg why is this book important and how do i look at this book to me this book is really a reference guide it is a reference guide for key financial concepts out there now what does this book do well this book starts you off with the basics pretty much what the financial contract and it starts moving you up to the binomial pricing model it goes into option greeks it goes into what's a volatility smile uh various financial concepts such as the black jewels model uh it also talks about things such as position analysis stock index futures and options models and real world applications etc etc now how do i read this book personally well what i like to do is as you can see here i like to make little notes so as i'm reading this book i am constantly making notes because this is a reference book once i want to revisit a concept maybe during the day while i'm at work i will go back to the notes i've written in a given chapter and i will go ahead and read them now this book is particularly great because the author is really contemplating the concepts that he's describing with you as you read the book so you will be asking yourself questions why does this work this way why does it work that way and the author actually asks these questions in the book and he explains them or he answers these questions rather he explains them in a very easy to understand and digestible form there is no complex mathematics in here there are charts that help really accentuates the points that the author is making okay so don't be afraid of complex math that's not in this book and if there is any math here it is actually broken down quite simply now guys this book is so important you know i can't stress enough the importance of this book this book's so important that an intern at the firm that i work at won't be caught dead without this in a two meter radius of his desk all right so make sure if you want to start that you start with this book alrighty guys now i also want to talk about another book that i believe you can actually replace with this book if you don't want to buy this book in particular and that book is dynamic hedging by naseem taleb now guys a lot of my quantitative trader friends haven't actually read this book they've read dynamic hedging by nasim taleb but a lot of others have read this book so it's really a pick the book that you want to read the most and pick the author that you want to read from the most because those two books are interchangeable and they are both online for a relatively modest price of around 30 to 40 dollars so you're not gonna run you know thousands of dollars on these books alrighty guys what's another book that i recommend well the second book that i recommend isn't a reference book it is more of an interview prep and refresher book that book is called frequently asked questions in quantitative finance second edition by paul wilmot okay now why do i like this book well this book has a lot of the concepts in the actual reference book but it breaks it down into two to three pages at maximum now why why do they do that well this book is really made to be kind of like an interview prep book a reminder book a book to remind you about key concepts without having to read through the minutia of those concepts that are described in the reference book now i really like this book as well for for the sheer fact that the actual author is stepping on a communist flag but above and beyond that what's great about this book is even though it's a refresher book if you'd like to read more about the fundamental concepts here let me find a page for you it actually has a references section okay it has a references section and further reading in case you want to go into the details of the actual concepts that are illustrated in this book now let's take a look at the actual table of contents for this book so we understand what's in it this book starts off like any other book with its table of contents but the primary section in this table of context is the faq section okay the faq section is around 200 pages and like i said guys that's the two to three page section that just or sorry it's a 200 page section that has two to three pages for each theme okay that's the section that's the faq section so you have a question for example what is iota's lima and they'll explain what iota's lima is in around two to three pages like i said guys with a further reading section now what's really great about this book and why i'm emphasizing this book to you guys here is the fact that it goes above and beyond simple financial concepts it also talks about things that you will need in the actual interview practical applications of the actual interview now what are those well for example brain teasers this book has an entire section on brain teasers 30 pages on brain teasers that can guarantee you will probably come up in one of your interviews another part of this book that's really oriented towards the interview process and making sure that you land the job is that it has a section on getting a quant job that section is i believe also around 30 pages and it goes through everything from the interview to how you should address how you should act to what you should say to what people get wrong about the job what people get right about the job how you should present yourself etc etc so guys if you're looking for a refresher if you're looking for a book to prepare you for an interview this is definitely the book that you want to keep on on hand and in fact it's it's quite pocket-sized so you can throw it in your bag read it on the subway and just help refresh your own financial concepts even if you already made it into the space of quantitative training alrighty guys i already talked about a reference book and then a refresher book i think if you understand the concepts in this book you are more than sent for at least a junior trading position at the top proprietary firms in america or in the world really that's just how important these concepts are and that's just how powerful these books are but i also want to talk about another concept or a book rather that reflects this concept that a lot of you have been asking me for now a lot of you have been asking me coding jesus do i need to know how to program how proficient do i need to know program or how proficient i have to be in programming to land a position as a quantitative trader now guys this is a really good question currently learning programming is not a must-have there are a bunch of traders that don't know how to write a single line of code but if you want to help separate yourself from the pack let's put it that way then you're going to want to learn how to program and you're going to want to need a book that will teach you how to program the fundamental concepts that you will be using on the job as a quantitative trader like i said guys currently you might not even have to pick up this book because it's not a requirement but it will definitely help you stand out in other words it's not a must have but it is definitely a nice to have what is that book i don't personally have the book but you can find it online it is called python for data analysis by wes mckinney okay why is this book important well guys let's first talk about the author not only is this book published by o'reilly and i love the way that o'reilly writes their books this author also comes from a mathematics background and i believe has worked in the space of quantitative finance he graduated with a degree in mathematics from mit and he explains everything extremely simply with practical examples and applications so throughout the book he will be writing programs alongside of you while teaching you the fundamental concept that you need to actually write these programs now what does he go through in this book well he starts about really from the fundamentals of python so you don't need to know how to write a line of code before you jump into this book and he will go through things like pandas in fact i believe he is the founder of the pandas data frame he is the actual writer of the founding writer of that package um in python he also talks about numpy how to group data how to aggregate data time series in python et cetera et cetera so the author really comes from the background that you want to be in and he writes his book via the lens of that background which is extremely important alrighty guys let's look let's get into the next book that you will read and as you guys can see while i'm going through this list i'm taking parts of various concepts that you will need to learn to become a quantitative trader for example option trading and microstructure that's the first book that i talked about the next book that i talked about was a refresher so it talks about the fundamental concepts you will need to break into the interview the book that i just talked about focuses on programming and this next book talks about the mathematics that you will need to know to break into the space of quantitative trading now guys a lot of people ask me what math do i need to know do i need to be a mathematician do i need a master's degree do i need to be a phd the answer is no you don't need to be a phd but you do need to understand linear algebra stochastic calculus and probability in statistics to be able to pass that bar to break into the world of quantitative trading that doesn't mean as a quantitative trader you will be spending 90 of your time writing down mathematical proofs in fact you'll be spending 90 of your time trading because that's literally what's in the job description and in your title but regardless guys quantitative trading firms use math as a minimum bar to filter candidates and that's why i want to recommend this book to you now what is this book this book is linear algebra by gilbert strang okay this book starts off from solving linear equations and it goes all the way to complex vectors and matrices so guys this book is going to be extremely important for your development and for your breaking into the space of quantitative trading now what i particularly like about this book even though i haven't personally read it is that it goes through various problems through the chapters it doesn't just focus on all these complex mathematical proofs it goes through problems and it provides solutions now while i haven't personally read it my quantitative traitor friend at jump trading has read it and he is reasonably confident to recommend this book to me because he knows that this book will be useful for you out there so let's go ahead and thank my friend out there at jump trading because this book will be the book that you will need to read if you want to become proficient in math and be able to achieve that minimum level of competency to pass that interview with flying colors now what's great about this author is that this author actually has a lot of free courses on mit open courseware so if you would like to understand how he writes this book you can really go ahead and read his lectures or not rather read his lectures view his lectures online and the way that he describes his lectures is really going to be the style in which he actually writes his book if you want a harder book which one of my quantitative researcher friends recommended above and beyond this linear algebra by gilbert strang you can go ahead and read a book called linear algebra done right now i'm not sure if it's by the same author or a different author but it is called linear eligible linear algebra done right i will link it in the description box below alrighty guys those are the four key books you need to read if you want to break into the space of quantitative trading now this this video is about five books and we'll get into the fifth book in a sec in a session but guys if you are able to read these four books and retain at least 25 to 40 percent of these four books you are without a doubt in my mind and in my friends minds completely capable of being a quantitative trader and breaking into the space now whether you can handle the role over the long term that's a totally another topic for a separate video but it will definitely provide you with the competency that you need and the confidence that you need to break into the space all right guys now the next book that i will recommend will be more essay based in fact it is a collection of essays and it is more for the advanced quantitative trader or quantitative researcher because it does go a bit more into the formula part of quantitative trading now like i said guys the first four books that i recommended are more than enough to break into the space but this book is for the person that is more seasoned or would like to go a little above and beyond and that book is advances in portfolio management by grindelwald and khan now these two people have been cited in more academic papers than months that i've been alive and they are really kind of thought leaders in the space of quantitative finance and portfolio management this is really for the book for the person that wants to go beyond being a trader to eventually being promoted to a senior trader or in other words an actual team lead the person responsible for managing the portfolio's p l and the risks associated with that p l and focus on executing those strategies now this book like i said is a collection of essays so it's not going to be an extremely dense book and the best way to read it is to really read the essay that you find most interesting for example in chapter two here and i've read through some of these chapters in order to actually vet this book for you guys in chapter two he taught rather chapter three i believe he talks about seven insights into active management and the first insight is that active management is worse than a zero-sum game so if you want to actually understand what that means you can go ahead and read this insight another insight that he has is that alphas must control for skill volatility and expectations and in this book he actually talks about how you know if you are a good portfolio manager in other words what your win rate should be now don't get this confused with the win rate or the perverted version of win rate that day traders will often talk about the actual academic definition of win rate is your ability to predict the signage of returns so standing at time equals zero apple trades at 100 what's apple going to be tomorrow at open and what he really talks about here is that a 53 win rate is actually extraordinary now when you talk to day traders on forums on reddit and online they will talk about 90 win rates 100 win rates 140 win rates obviously that was a joke but you know they're talking about all these high win rates but they perverted the term win rate from predicting the signage of returns to some esoteric strategy win rate which of course is irrelevant because you can have a strategy with a 90 win rate that has a negative expected value so it's totally meaningless all right guys that was the fifth book or rather the five books that you should read if you want to break into the space of quantitative trading as i mentioned the first four books are really all that you need but if you want to go above and beyond and if you're really intellectually curious then this book is going to be the fifth book that you want to read now guys i have a little surprise bonus book for you in this list of five books that surprise bonus book is going to be called this and i'll tell you why you should read it especially if you're coming from the background of a day trader that book is called and i have it but i lent it to a friend because he was interested in this book after my recent live stream on day trading why a coin flip is a better strategy than using technical analysis in the financial stock market once again technical analysis is mostly why a coin flip is a better strategy than using technical analysis in the financial stock market by tim morris now why is this book going to be important it's going to be especially important if you've come from the realm of day trading because to be frank guys a lot of what you've learned in day trading you will need to unlearn and this book really helps you unlearn it now this book isn't a very large book it is around 70 pages but it really breaks down why technical analysis is to be frank entirely i can go through the academic papers with you guys and in fact i have gone through them during my live streams but if you're not interested in reading through the academic papers and guys i wasn't really interested in reading through them either because i already know that technical analysis is then this book is really a book that you want to read through in order to snap yourself out of the programming that the fake data trading gurus out there will try to sell you and all those you know core sellers out there will try to sell you one alrighty guys hopefully you've enjoyed this video if you did enjoy this video make sure to give it a like all the links to the books that i've mentioned will be in the description box down below and what else will be there is a link to my discord a link to my patreon and guys my email if you'd like to get in contact with me so thank you for watching this video guys make sure to share it far and wide subscribe and like cheers

Channel: Coding Jesus

Views: 445,031

Keywords: finance, quant, quantitative finance, personal finance 101, personal finance, investing, day trading, trading, quant trading, quant research, research, coding, algorithms, black scholes, model, volatility modeling, GARCH, quant interview, quant trading interview, breaking into quant trading

Id: FuNTNDEUwkw

Length: 17min 4sec (1024 seconds)

Published: Sat Jul 10 2021