Trading Systems And Methods

Description

By (author) Kaufman Perry J.

:

The new edition of the definitive reference to trading systems—expanded and thoroughly updated.

Professional and individual traders haverelied on Trading Systems and Methods for over three decades. Acclaimed trading systems expert Perry Kaufman provides complete, authoritative information on proven indicators, programs, systems, and algorithms. Now in its sixth edition, this respected book continues to provide readers with the knowledge required to develop or select the trading programs best suited for their needs. In-depth discussions of basic mathematical and statistical concepts instruct readers on how much data to use, how to create an index, how to determine probabilities, and how best to test your ideas. These technical tools and indicators help readers identify trends, momentum, and patterns, while an analytical framework enables comparisons of systematic methods and techniques.

This updated, fully-revised edition offers new examples using stocks, ETFs and futures, and provides expanded coverage of arbitrage, high frequency trading, and sophisticated risk management models. More programs and strategies have been added, such as Artificial Intelligence techniques and Game Theory approaches to trading. Offering a complete array of practical, user-ready tools, this invaluable resource:

• Offers comprehensive revisions and additional mathematical and statistical tools, trading systems, and examples of current market situations
• Explains basic mathematical and statistical concepts with accompanying code
• Includes new Excel spreadsheets with genetic algorithms, TradeStation code, MetaStock code, and more
• Provides access to a companion website packed with supplemental materials

Trading Systems and Methods is an indispensable reference on trading systems, as well as system design and methods for professional and individual active traders, money managers, trading systems developers. 

Table of contents:

Preface xv

Chapter 1 Introduction 1

The Expanding Role of Technical Analysis 1

Convergence of Trading Styles in Stocks and Futures 3

Professional and Amateur 5

Random Walk 6

Deciding on a Trading Style 7

Measuring Noise 9

Maturing Markets and Globalization 12

Background Material 14

System Development Guidelines 15

Objectives of This Book 16

Profile of a Trading System 17

A Word about the Notation Used in This Book 20

A Final Comment 20

Chapter 2 Basic Concepts and Calculations 21

A Brief Word About Data 22

Simple Measures of Error 23

On Average 24

Price Distribution 28

Moments of the Distribution: Mean, Variance, Skewness, and Kurtosis 32

Choosing Between Frequency Distribution and Standard Deviation 37

Measuring Similarity 38

Standardizing Risk and Return 40

The Index 45

An Overview of Probability 50

Supply and Demand 56

Chapter 3 Charting 67

Finding Consistent Patterns 68

What Causes the Major Price Moves and Trends? 70

The Bar Chart and Its Interpretation by Charles Dow 71

Chart Formations 80

Trendlines 81

One-Day Patterns 89

Continuation Patterns 101

Basic Concepts in Chart Trading 105

Accumulation and Distribution: Bottoms and Tops 106

Episodic Patterns 118

Price Objectives for Bar Charting 119

Implied Strategies in Candlestick Charts 126

Practical Use of the Bar Chart 131

Evolution in Price Patterns 134

Chapter 4 Charting Systems 137

Dunnigan and the Thrust Method 138

Nofri’s Congestion-Phase System 141

Outside Days and Inside Days 143

Pivot Points 145

Action and Reaction 146

Programming the Channel