Читать книгу Predatory Trading and Crowded Exits - James Clunie - Страница 5

Preface

What this book is about

In this book I look at a series of phenomena that can drive security prices temporarily away from their equilibrium levels, creating opportunities for traders to profit from. At the same time, these phenomena create the risk of losses for the unaware.

The phenomena I examine have only recently begun to be better understood. They include two important liquidity problems faced by traders: predatory trading and crowded exits. I examine these on three levels. Firstly, I describe the basic principles and theory behind the phenomena, to build a solid framework for the way we think about these situations. Secondly, I examine the accumulated empirical evidence on these events. This reveals what has generally happened in these situations, and what the profit opportunity and risks might be like. Finally, I consider a number of individual cases to illustrate what can happen to traders in practice. In the main, these will be extreme events or special situations from which we can learn.

By understanding these phenomena in this way a trader could gain an edge over others in the market. In the first instance, this is achieved by avoiding becoming the victim of the phenomena I describe. Beyond this, it might be possible to use detailed knowledge of some of these situations to (legally and ethically) profit from the events.

Who this book is for

This book should be of interest to traders seeking to gain a superior understanding of how markets work, both in theory and in practice. It should also be of interest to longer-horizon investors who are seeking to avoid timing errors, and to risk managers seeking to understand better the subtleties of risk beyond traditional risk statistics. Finally, I expect that a number of academics and students of markets will find this work stimulating and thought-provoking.

How the book is structured

The book starts with an introduction to the notion of the ‘fair value’ of a security. Then, by thinking of markets as an eco-system of different types of players, I describe ways in which securities prices can move away from equilibrium and stay mis-priced for some time. I examine specific examples of these phenomena, include predatory trading, the use of stop losses, crowded exits and manipulation. I end with some thoughts on how traders should make use of their knowledge of these phenomena.