Breaking the Black Box [Hardcover]

Martin J. Pring (Author)

Book Description

Publication Date: May 31, 2000

Listen, watch, read and learn how to design, test and implement your own mechanical trading systems. Part I takes you systematically through the process of designing, testing and applying systems in the market place, along with tools for risk management, leverage, timing and more. Part II covers systems based on a single security, such as U.S. equity market, closed end mutual funds, soybeans and the CRB. Part III highlights intermarket relationships. Here, you will learn to analyze equities vs. short-term interest rates, CRB vs. gold, bonds vs. commodities and systems that use relative strength. Proof is in the pudding, so Parts 2 and 3 illustrates these principles with actual market place examples of several tried and tested systems. Lastly, Part IV is the Appendix, which offers the interactive quiz (with answers) found on the CD, reproduced to help you test your knowledge of material already covered. You will also find a glossary of terms used within the book.

If you pont want to design your own systemthats okay. Martin offers you a full menu of ideas that can be implemented immediately. None are perfect, but some, such as that is applied to the NASDAQ, beat the buy/hold approach by 3,000% between 1980 and 1998. Remember when gold was in the doldrums between 1981 and the turn of the century? He shows you an approach using a no-load gold fund that would have turned $1 to $50 between 1989/98. Not all systems are of the Holy Grail variety and Pring is not afraid to tell his students about the potential pitfalls and problems with the application. One of his favorite and best-performing systems using the British pound worked brilliantly between 1970 and 1990, then for some unforeseeable reason went bust. While it was not possible to anticipate such a development, he does tell us how we might have identified its weakness just after it began to fail and which currency showed greater promise using the same approach.

Prings Technical Analysis Explained has been a best seller for two decades and his more recent Introduction to Technical Analysis CD-ROM tutorial has already established itself as a standard work in the field. Now, for the first time, the fascinating subject of mechanical trading systems is written in easy-to-understand language. Breaking the Black Box is the third in his Advanced Technical Analysis series of book/CD-ROM combinations where interesting topics are presented at length using the audiovisual format. The two previous CD-ROM tutorials are Learning the KST and Introduction to Candlestick Charting. The fourth, Technicians Guide to Day Trading, offers a complete guide to use charts for more profitable day trading.

Editorial Reviews

Review

...Just about any novice system developer will find Breaking the Black Box a good introduction to system development... -- J. Sweeney, Technical Editor, Technical Analysis of Stocks & Commodities Magazine, June, 1999

...provides a wealth of information that could save you time, and help you avoid potentially costly mistakes. -- G. Doverspike, Seattle, WA

...provides valuable insights for the intermediate as well as the professional trader. -- M. Barker, Sarasota, FL

From the Back Cover

Step-by-Step Guidelines for Designing and Testing Technical Trading Systems--and Dramatically Increasing Profit Potential!

"The material that this CD covers is classic. . . . Just about any novice system developer will find Breaking the Black Box a good introduction to system development and helpful in supplying trading ideas."

--John Sweeney

Former Editor, Technical Analysis of Stocks & Commodities

Martin Pring's Breaking the Black Box is today's most straightforward and unbiased introduction to designing, testing, and implementing reliable mechanical trading systems. Filled with principles and strategies for trading markets based on discipline and reality, not emotion and wishful thinking, it describes actual systems that have worked in the marketplace, essential risk management techniques, and guidelines for developing systems that will allow you to recognize--and participate with knowledge and confidence in--the trends that occur each and every trading day.

McGraw-Hill's Martin Pring on Technical Analysis series is a unique combination of in-depth audio-visual CD-ROM tutorial and workbook, and is an excellent teaching tool for in-depth research, instant reference, and interactive review. It provides technical traders with remarkably accurate methods--proven effective in today's fast-moving markets--for anticipating and exploiting trends.

Actual trading charts show you mechanical trading systems in action!

--This text refers to an out of print or unavailable edition of this title.

See all Editorial Reviews

Product Details

• Hardcover: 295 pages
• Publisher: International Institute for Economic Research (May 31, 2000)
• Language: English
• ISBN-10: 0967869102
• ISBN-13: 978-0967869100
• Product Dimensions: 10.1 x 7.1 x 1.2 inches
• Shipping Weight: 2.1 pounds
• Average Customer Review: 3.8 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #3,146,235 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

25 of 30 people found the following review helpful:

1.0 out of 5 stars A delusion and a legal fraud, August 10, 2001

By 

Francesco Vandelli (Gudo Visconti, MI Italy) - See all my reviews

This review is from: Breaking the Black Box (Hardcover)

It doesn't break any black box. The author writes with it's usual clarity but the text does not keep up with it's promises at all. It generalizes about trading systems but it does not give any real advise. It is in line with the author who is good in teaching the basis of TA but nothing else. Unfortunately famous persons obtain a large following even with routine and useless productions like this. John Sweeney, in the back cover page of the book, states: "....a good introduction to system developments and helpul in supplying trading ideas....". That is right: introduction, no more. Ideas, right or wrong, are everywhere. Also don't get fooled by the CD ROM which comes with the book. It is just a tutorial (no productive software) and, in order to force you to see his site, where you are offered other (a lot of) things, the CD runs only with MS WIN NT. I was able to use it with Win 2000 but why not produce and offer it for the most widespread WIN operating system? Unfortunately exploiting losers is the rule. Extremely sad! Don't buy this book. There are a lot of them much better on trading systems.

4 of 5 people found the following review helpful:

4.0 out of 5 stars Sound Guidelines for Setting Mechanical System Parameters, February 7, 2002

By 

Jimmie Sigsway (New Milford, CT) - See all my reviews

This review is from: Breaking the Black Box (Hardcover)

Breaking the Black Box was not written for lazy traders. There is no Holy Grail. Traders who want to learn the skill of building a functional system will benefit from this CD tutorial. If you're looking for unreal profits and wild promises, you won't find it here! Great, sound advise.

1 of 1 people found the following review helpful:

5.0 out of 5 stars What Every Backtester Should Know, October 18, 2009

By 

FreeAtLast (Newington, CT USA) - See all my reviews

This review is from: Breaking the Black Box (Paperback)

Backtesting and adhering to mechanical systems is not intuitive. In a clear book written from a place of knowledge, Martin Pring makes accessible to newbies and experienced investors alike the principles and pitfalls of backtesting and following mechanical systems.

Intuition, the Popular Wisdom, and social proof are three loose-sand foundations on which to base a trading system. What we think we know, what we're told is true, what others believe, and what we suspect do not necessarily hold up to backtests that we can do with such products as VectorVest or Zack's Research Wizard or the somewhat cruder backtesting capabilities provided by some other products. If they did, we'd have nothing to learn from backtesting and the time and expense spent on it would be a waste of time. In fact, when backtesting is most valuable is when it proves to us that what we thought is true about investing doesn't work out -- a lesson that we can either learn from a backtest or from losing money in the market.

On the other hand, backtesting itself has its pitfalls including unwitting curve fitting, concluding from too few tests OR from many tests over just one market condition, the delusional discovery of a Holy Grail, issues of survivorship bias, and not accounting for price splits when selecting from the past with price as a criterion. Pring covers it all . . . and in clear prose.

But, even if the backtesting is valid and sufficient, there are yet more pitfalls -- the most common of which is not playing the system as tested but a system modified on the fly -- which isn't playing the system at all but simply flying by the seat of one's pants. This, of course, will provide different results than one might project from the system as tested.

This is a book of concepts, of priniciples, of cautions ,and of earned wisdom. It is not a how-to cookbook for dummies that one miserable review (and miserable reviewer) was looking for. It is, rather, a more useful book. It teaches the principles to follow. It teaches the pitfalls to avoid. Sorry, but the backtesting and the creation of the system are for you to do. Here, Pring isn't offering fish but fishing lessons. And, for that very reason, this book is invaluable.

I recommend this book highly for every VectorVest user, for every Research Wizard subscriber, and for anyone who wants to get beyond fear and greed to a rational, disciplined, and high-odds approach to his investing. For those willing to do the work of backtesting, this book will ensure that the work is well-directed and sound. For those looking for do-this-specific-thing-and-prosper handouts, maybe this (and investing itself!!) isn't such a good choice . . . not unless they're open to learning.