Design, Testing, and Optimization of Trading Systems

Rating:
Summary: Excellent how-to on applying simple statistical analysis
Review: A great instructional book on the application of statistical analysis to trading systems. It's excellent for novice trading system developers who don't yet understand the importance of rigorous testing or discretionary traders who aren't yet aware of their need for a carefully and thoroughly tested trading system--a real eye-opener. While the text is somewhat repetitive and the references to software are extremely dated, the techniques within are timeless and are boiled down so that non-mathematicians can easy understand and apply them. This book helps you bypass the slow process of learning system development by trial-and-error and gives you a clear step-by-step breakdown of how to ensure that your trading system is sound and "robust." However, for those of you looking for trading system recipes/indicators/source code, you won't find it here. Coming up with ideas for a trading system and setting them up is entirely up to you--this book only describes the process of forging an existing trading system into a robust system that can be used successfully in real-time trading. A must-read for any serious trading system developer!

Rating:
Summary: Excellent how-to on applying simple statistical analysis
Review: A great instructional book on the application of statistical analysis to trading systems. It's excellent for novice trading system developers who don't yet understand the importance of rigorous testing or discretionary traders who aren't yet aware of their need for a carefully and thoroughly tested trading system--a real eye-opener. While the text is somewhat repetitive and the references to software are extremely dated, the techniques within are timeless and are boiled down so that non-mathematicians can easy understand and apply them. This book helps you bypass the slow process of learning system development by trial-and-error and gives you a clear step-by-step breakdown of how to ensure that your trading system is sound and "robust." However, for those of you looking for trading system recipes/indicators/source code, you won't find it here. Coming up with ideas for a trading system and setting them up is entirely up to you--this book only describes the process of forging an existing trading system into a robust system that can be used successfully in real-time trading. A must-read for any serious trading system developer!

Rating:
Summary: Well done !
Review: An excellent guide through trading systems. It helps me a lot in My day trading.Only useful things.

Rating:
Summary: Authors' Comments
Review: I am pleased to note that many still find my book published in 1991 to be useful and informative.

However, I might suggest to any who come to these pages to be wary of the claims made by the vendors in the sponsered links on this page, especially the last two.

I suspect that it would be prudent for a trader who is considering one of these trading systems to apply the principles of trading system evaluation provided in my book to theses claims before becoming involved with these trading systems.

Bob Pardo

Rating:
Summary: One of the few really good books on the subject
Review: If you are trying to develop a profitable trading system, this is a book you really should read. It is one of the very few good books out there on the subject of developing an automated trading engine that will withstand the test of time and hold up when the bets are placed. It covers all the critical issues involved in successful trading system development: data, backtesting, optimization (and over-optimization), issues of robustness, and more. I would not hesitate to recommend it.

Jeffrey Owen Katz, Ph.D.
Author (with Donna McCormick): "The Encyclopedia of Trading Strategies" (McGraw Hill, 2000).


Rating:
Summary: Best Introductory Technical Analysis Book
Review: This book contains everything you need to know to understand the theory of computerized trading systems. It goes through the process of choosing a strategy, implementing it in algorithm form, perfecting variables, and optimization. The most important parts, in my opinion, are those regarding tests of statistical significance of the test results. The author is also careful to caution against any "over-optimization," which is the bane of any trading system.

Incedentally, I manage the technical analysis arm of a newsletter that attempts to forecast the best performing Fidelity Select mutual fund. This book was an asset during the implementation of my trading system. I would choose it before "The Mathematics of Technical Analysis," by Clifford Sherry, for example.

The trading system paradigm detailed in this book is based on technical analysis; the use of mathematical tools to estimate the future performance of a security. Technical analysis is, of course, at odds with the strict versions of the efficient market theory. Do you believe that stock performance is deterministic, that future price changes can be inferred from past ones? If so, this is the book to use to implement your computerized trading system.