Understanding order book dynamics is crucial for anyone looking to excel in quantitative trading. The order book reveals the intentions of market participants and provides insights into liquidity, price discovery, and market microstructure. To help you get started on this journey, I've compiled a list of seminal papers that are must-reads for mastering this complex subject:
- "A Dynamic Model of the Limit Order Book" by Sophie Moinas and Sébastien Page - provides a solid foundation for understanding how order books evolve over time.
- "Market Microstructure Theory" by Maureen O'Hara - covers price formation, trading mechanisms, and the role of information.
- "The Ecology of the Limit Order Book" by Jean-Philippe Bouchaud, Marc Mézard, and Marc Potters - explores the statistical properties of order books and highlights the importance of understanding the order flow and liquidity.
- "Limit Order Placement in a High-Frequency Trading Environment" by Robert Almgren and Nicolas Chriss - practical insights into how traders can minimise execution costs and manage risks.
- "The Price Impact of Order Book Events" by Ingmar Nolte, Mark Salmon, and Chris Adcock - a detailed analysis of how order submissions, cancellations, and executions influence price movements.