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Design, Testing, and Optimization of Trading Systems [Hardcover]

Robert Pardo (Author)
4.3 out of 5 stars  See all reviews (12 customer reviews)


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The Evaluation and Optimization of Trading Strategies (Wiley Trading) The Evaluation and Optimization of Trading Strategies (Wiley Trading) 3.6 out of 5 stars (7)
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Book Description

0471554464 978-0471554462 August 12, 1992 1
A practical, hands-on guide to setting up, adjusting, and trading mechanical systems that requires no computer or programming skills! Here’s everything you’ll need to develop and verify each stage of a profitable trading strategy, from formulation through testing to real-time trading. Armed with the author’s battery of easily accomplished testing and optimization techniques — many never before published — you’ll design a workable trading strategy, reliably measure its profit potential and risk, and then test it to see if it works in real-time trading. No matter what your level of trading expertise, now you can swiftly isolate and eliminate the causes of trading failure and make the decisions essential to profitable computerized trading. You’ll discover:
  • The seven major components of mechanical trading strategies and their uses
  • When and how to use fast, accurate, and realistic computer simulations to evaluate a strategy’s trading performance without risking precious capital
  • The best ways to tailor a trading strategy to fit the unique personalities of widely different markets
  • What to expect from a trading model in real-time trading
  • How to judge trading performance with respect to historical testing performance
Design, Testing, and Optimization of Trading Systems helps you develop, evaluate, and apply a winning computer trading system that suits your specific needs.


Editorial Reviews

From the Publisher

Provides easily understood, hands-on guidance for futures and options traders who are not computer literate. Using an approach that can be followed by whichever method of technical analysis readers prefer, it quickly and efficiently demonstrates exactly how to set up and adjust a successful trading model for a wide range of trading techniques and products, market considerations and risk profiles.

From the Inside Flap

The Wiley Trader’s Advantage is a new series of concise, highly focused books designed to keep savvy futures, options, stocks, bonds, and commodities traders abreast of the latest, successful strategies and techniques used by the keenest minds in the business. Each title delivers timely, cutting-edge guidance on a key aspect of trading, including trading systems, portfolio management methods, computerized forecasting, and systems optimization. Design, Testing, and Optimization of Trading Systems is designed to help savvy traders to formulate and test trading structures to amplify trading profit and avoid real-time trading issues. This is the first book to offer practical, hands-on guidance for setting up, adjusting, and trading mechanical systems without requiring computer language or programming skills. And its flexible, user-friendly approach can be easily followed regardless of which form of technical analysis you’re currently using — stochastics, moving averages, chart patterns, RSI, breakout methods, and others. Here, finally, is the systematic, empirical guidance you demand to develop and verify each stage of a profitable trading strategy, from formulation through testing to real-time trading. Armed with the author’s battery of easily accomplished testing and optimization techniques — many never before published — you’ll design a workable trading strategy, reliably measure its profit potential and risk, then test it to see if it works in real-time trading. Moreover, you’ll learn how to optimize the strategy over a variety of different markets and time periods, and maintain its peak performance in the face of trends, volatility and liquidity changes, and new trading conditions. To insure testing accuracy, the author identifies the symptoms of overfitting and supplies proven guidelines for avoiding it. Design, Testing, and Optimization of Trading Systems recognizes that different traders have different levels of trading capital, time available, profit requirements, and risk tolerance. Whether you’re seeking to enhance your trading profit or make a start at strategy testing, you’ll find the perfect mix of practical instruction and advice to develop, evaluate, and apply a winning mechanical trading system that suits your exact needs.

Product Details

  • Hardcover: 176 pages
  • Publisher: Wiley; 1 edition (August 12, 1992)
  • Language: English
  • ISBN-10: 0471554464
  • ISBN-13: 978-0471554462
  • Product Dimensions: 9.1 x 6.2 x 0.8 inches
  • Shipping Weight: 13.6 ounces
  • Average Customer Review: 4.3 out of 5 stars  See all reviews (12 customer reviews)
  • Amazon Best Sellers Rank: #1,126,904 in Books (See Top 100 in Books)

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Customer Reviews

12 Reviews
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3 star:
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Average Customer Review
4.3 out of 5 stars (12 customer reviews)
 
 
 
 
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47 of 51 people found the following review helpful:
5.0 out of 5 stars Best Introductory Technical Analysis Book, August 19, 2001
By 
This review is from: Design, Testing, and Optimization of Trading Systems (Hardcover)
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.

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19 of 19 people found the following review helpful:
5.0 out of 5 stars Excellent how-to on applying simple statistical analysis, December 17, 2003
By 
Dennis Chang (Seal Beach, CA United States) - See all my reviews
(REAL NAME)   
This review is from: Design, Testing, and Optimization of Trading Systems (Hardcover)
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!
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11 of 14 people found the following review helpful:
5.0 out of 5 stars One of the few really good books on the subject, December 29, 2004
This review is from: Design, Testing, and Optimization of Trading Systems (Hardcover)
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).
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Inside This Book (learn more)
First Sentence:
Mechanical trading systems have been around as long as the markets. Read the first page
Key Phrases - Capitalized Phrases (CAPs): (learn more)
Close Status, Advanced Trader, Monthly Net, Analysis Report, Current Positions, Contract Traded, Trade Order, Level One, Script Name, Swiss Franc, Trades Analyzed, Year Profit Drawdown, Adjusted Pass, All Dollar Factor, Balance Drawback, Maximum Lots, Modified Pass, Month Avg, Month Variance, Period of Daily Range Ave, Pessimistic Margin, Profit Index, Total Loss, Valley Level
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