These aren't really textbooks, but regardless, the Market Wizards series by Jack Schwagger is highly recommended:
for the securities side of the industry and
for banks that take deposits and make loans.
If you want an introduction to HFT, I'll shamelessly plug my blog posts which describe the basic mechanics of it:
I also wrote a few posts later on about controversial HFT topics:
My posts probably read more like a "how to program python" tutorial than a compelling Michael Lewis narrative, however.
The book Trading and Exchanges ( http://amzn.to/2f0qtJb ) goes into a lot more detail than my blog, but it costs about $50-$90.
This will give you an idea and maybe whet your appetite about how markets and trading actually work, and all the reasons people use markets. From there you can work towards learning more about actually developing trading strategies more complex than buy and hold.
To quote from Larry Harris' textbook : "Arbitrageurs ensure that prices do not vary much across markets. When prices diverge, they buy in cheaper markets and sell in more expensive markets. The effect of their trading is to connect sellers in cheaper markets to buyers in more expensive markets."
Arbitrageurs effectively "port" liquidity from one market to another. This is the value they provide to others.
Thus I'm not sure I would describe this as arbitrage; or at least it's not the term the GP is looking for.
I'm referring to market microstructure in terms of the complex interactions amongst exchanges, the impact of Reg NMS, etc. Obviously the underlying algorithms can be boiled down to simple components.
For those interested in learning something about market microstructure, I highly recommend "Trading and Exchanges: Market Microstructure for Practitioners" as an introduction to the basics:
Well, first off, one person asked, the other told, but in your sentiment:
What you refer to is more likely a skew of information, a mix of information traders and (e.g.) value traders, or (generalizing term) noise traders.
There may not be a facit as to "Is this good or bad for the value of AAPL to have dividends paid out in this amount?". There may be different interpretations. Some might feel it's a sign of a new path in dividends payout from Apple even in the future. Some might think it's a short term "stunt" to keep the investors happy. Some might think it makes them less valuable as they have less money, some might think a strategy of catering to profit and investors will outweigh the "loss" in dividend payout.
Just looking at this thread of comments shows there are many interpretations.
If you think this is remotely interesting, I'd suggest reading up on reactions to news, e.g.: http://web.usm.my/journal/aamjaf/vol%207-2-2011/7-2-4.pdf (we overstimate the effects of bad news, and underestimate good news)
or an easy-to-read intro to financial markets: http://www.amazon.com/Trading-Exchanges-Market-Microstructur... (it's a big book, but easy to read selectively, and has a few good chapters on market participants that might help explain how the market works).
This does a really good job of explaining how having people fulfilling different roles viz trader, dealer, investor results in being able to buy and sell whatever you want whenever you want. I wish I could send a copy to everyone who thinks flipping second-hand goods on Craigslist is arbitrage.
I'm finding this a more interesting and detailed read than _Capital Markets for Quantitative Professionals_. For instance, the book traces through everything that happens when placing, executing, and settling typical trades.
On the other hand, I've taken the Canadian Securities Course, so perhaps Capital Markets is a better introduction for total beginners.
I would highly suggest picking up the book, Trading and Exchanges: Market Microstructure for Practitioners (http://www.amazon.com/dp/0195144708) by Larry Harris. To trade effectively you need to understand how the markets work and this book provides and outstanding tour through the markets, who participates in them, and why they do or don't make money.
There are innumerable ways to make money in the markets. Long term, short term, technical or fundamental, with retail platforms like Ninja or going very sophisticated and connecting directly to an exchange like NASDAQ using native protocols like ITCH and OUCH. Don't let naysayers distract you from your goal--for every naysayer there is always a counter point.
If you want some motivation, read through this IamA at reddit: http://www.reddit.com/r/IAmA/comments/9s9d7/iama_100_automat...