May I ask is there any book about how dealer's daily operation looks like? For example, how do they determine when to make a bulk entry or exit etc. ? Thank you.
*Obviously* he means drug dealers... ;p You might be interested in "Trading & Exchanges: Market Microstructure for Practitioners" by Larry Harris. In particular, I think Ch 13-15 might be of interest to you: "This part of the book examines how and why traders supply liquidity to other traders. We start in chapter 13 by discussing dealers. Dealers make markets. They allow other traders to trade small size quickly. Dealers tend to be high-frequency traders who do not know much about with whom they trade or the fundamental values of the instruments that they trade. Chapter 14 examines bid/ask spreads in dealer markets and in order-driven markets. The discussions in this chapter will help you to better understand the determinants of transaction costs. Chapter 15 considers how block traders arrange large trades. Block traders find liquidity for traders who want to trade large sizes. They generally know their clients well." (p. 277)
Try Josh Lukeman’s book: The Market Makers Edge. It is dated, but still has good information in it. He was a Goldman Saks market maker.
An excellent resource. The taxonomy of trader types is especially insightful as the majority of the content examines the structural motivations of the various market participants. Essential reading especially if one doesn't understand the concept of 'futile traders'.
%% Amen and actually the fraction 1/2 is still useful. He also worked for MS+ Bear Hunter LLC. Not that one would want to pay 1/2 bid/ask all the time,LOL
Books should be top notch quality (particularly in thinking process), or once's level of thinking goes down below that of the author's. The authors of trading books are generally low quality in thinking power.
Certainly. Harris is rigorous in his application of logic. It's delightful and stimulates the thinking process of the reader.