Further Reading
Annotated, and honest about what each is good for. Publication details are from memory and worth confirming.
On the methodology (read these first)
*Robert Pardo, The Evaluation and Optimization of Trading Strategies*** - the standard reference on walk-forward analysis and the source of most of Chapter 9. Dry, and the most directly useful book on this list for what this book is about.
*Marcos López de Prado, Advances in Financial Machine Learning*** - dense and occasionally polemical. Chapters 7 and 11-12 on cross-validation, purging, embargo, and backtest overfitting are the most rigorous available treatment of why standard validation fails on financial data. Read those chapters even if you skip the rest.
*David Bailey, Jonathan Borwein, Marcos López de Prado and Qiji Jim Zhu, "Pseudo-Mathematics and Financial Charlatanism" (Notices of the AMS, 2014), and the related work on the probability of backtest overfitting and the deflated Sharpe ratio*. Freely available. Formalises the best-of-N problem from Chapter 8 and tells you how much to discount your result for the number of trials.
*Nassim Taleb, Fooled by Randomness*** - no method, but the correct prior. The single most useful book for calibrating how much of an observed track record is skill.
On building systems
*Robert Carver, Systematic Trading** - the closest thing to this book's Part IV written by a practitioner. Excellent on position sizing, volatility scaling and portfolio construction. Carver's Advanced Futures Trading Strategies is the more technical follow-up, and his Leveraged Trading* is the gentler entry point.
*Ernest Chan, Quantitative Trading* and Algorithmic Trading: Winning Strategies and Their Rationale** - accessible, practical, honest about the gap between backtest and live. The second contains a good treatment of cointegration and mean reversion relevant to Chapter 12.
*Andreas Clenow, Following the Trend** - the clearest exposition of why diversification across many markets is the dominant driver of trend-following results (Chapter 11). His Trading Evolved* covers Python implementation.
*Perry Kaufman, Trading Systems and Methods*** - encyclopaedic reference rather than a read-through. Useful for looking up how a technique is conventionally constructed.
*Wes McKinney, Python for Data Analysis*** - pandas from its author. The reference for the tooling used throughout Part II.
On markets themselves
*Larry Harris, Trading and Exchanges*** - the standard reference on market microstructure and the best single source for Chapters 2 and 3. Long, and worth it.
*Jean-Philippe Bouchaud, Julius Bonart, Jonathan Donier and Martin Gould, Trades, Quotes and Prices*** - rigorous treatment of order books, market impact and the square-root impact law referenced in Chapter 15.
*Antti Ilmanen, Expected Returns*** - the best single book on risk premia, and the right background for Chapter 14. Explains why carry and value and trend earn what they earn rather than merely documenting that they do.
*Euan Sinclair, Volatility Trading*** - if Chapter 13's discussion of the volatility risk premium interests you, this is where to go next. Unusually honest about the tail risk.
Primary papers by chapter
Chapter 11 (trend): Jegadeesh and Titman, "Returns to Buying Winners and Selling Losers" (Journal of Finance, 1993). Moskowitz, Ooi and Pedersen, "Time Series Momentum" (JFE, 2012). Hurst, Ooi and Pedersen, "A Century of Evidence on Trend-Following Investing" (AQR). Daniel and Moskowitz, "Momentum Crashes" (JFE, 2016). Fung and Hsieh on trend-follower returns as lookback straddles (RFS, 2001).
Chapter 12 (mean reversion): Gatev, Goetzmann and Rouwenhorst, "Pairs Trading: Performance of a Relative-Value Arbitrage Rule" (RFS, 2006). Lehmann, "Fads, Martingales, and Market Efficiency" (QJE, 1990). Lo and MacKinlay on contrarian profits (RFS, 1990).
Chapter 13 (volatility): Engle (1982) on ARCH and Bollerslev (1986) on GARCH for volatility clustering. Yang and Zhang (2000) for the volatility estimator used in the chapter.
Chapter 14 (carry): Koijen, Moskowitz, Pedersen and Vrugt, "Carry" (JFE, 2018).
Chapter 15 (microstructure): Avellaneda and Stoikov, "High-frequency trading in a limit order book" (2008).
Chapter 1 (base rates): Barber and Odean, "Trading Is Hazardous to Your Wealth" (Journal of Finance, 2000). Barber, Lee, Liu and Odean on Taiwanese day traders. Chague, De-Losso and Giovannetti, "Day Trading for a Living?" (2020).
What to skip
Trading books organised around chart patterns, indicator catalogues, or personal track records without methodology. The Market Wizards interview series is entertaining and occasionally insightful, but it is a survivorship-biased sample of exactly the kind Chapter 6 warns about - the practitioners who lost are not interviewed.
End of book.