Customer Reviews

The Encyclopedia of Trading Strategies

5 star:		(17)
4 star:		(4)
3 star:		(4)
2 star:		(3)
1 star:		(0)

 

 

The authors cover the ground of "Build a Trading Program" quite effectively. They have presented results using systems built around traditional technical indicators and their own "standard exit" method. These they use to show how to evaluate systems. This brief summary understates considerably the material presented on entries.

Differing entry techniques (limit, stop & market)are examined in the context of each "system." The reader is thus exposed to both the methodology of statistical evaluation and to "how it feels" to use this technique or that.

The authors actually start the book with an introduction to data types, availability and time frame; the bare-bones of needed statistical material; simulators (programs to simulate trading); and, optimizers and optimizing. I scanned the material, due to my own familiarity with it. It seems like good background. One point I've not seen elsewhere is the suggestion to optimize for high Student-t scores, an excellent idea.

Exits and exit techniques are dealt with, although less voluminously than entry techniques. One reason for that is the difference in amount written on the two. Everyone who wants to sell you a system, be it a book or a seminar, will emphasize entry technique. Very little has been written on exits, which are a more difficult sell. Katz & McCormick have presented the basic categories of exits. While "basic categories" doesn't sound like much, it is more than I can recall appearing elsewhere in print. These categories are the building blocks for the second most important part of a system: exits. (More important is money management.) Here, as throughout the book, C+ code is included, allowing one to implement one's own approaches.

Another section, also with code, is use of genetic algorithms in system design. This is one of the best sections on GA's in trading that I've seen. It is not exhaustive (thank heavens) but will get you started without forcing a reading of Goldberg's text on GA's. Another departure from the norm is a short presentation of using GA's to optimize for the elements of the system, not for the actual output, a superior idea.

As the authors point out, exits are far more important than entry. A test system I wrote recently entered almost randomly after it had determined volatility was sufficiently high. Although not sophisticated, the exits were other than random. Although less than 20% accurate, it produced very substantial profits. Actual implementation is a bit trickier; real markets don't always provide the smooth entry and exit of systems testing. Be that as it may, the essential point remains: exit and money management are where the profits are. Entries are for seminar junkies and would be traders.

If trading is what you want to do, and computer-driven systems are what you will use, this is a book that you should read. It is the best I've seen (and I've seen a few). The other pieces to the trading puzzle are psychology (Ruth Roosevelt) and money management (Ralph Vince - not perfect, but a necessary read).

Most books on trading assume either that the reader never got to college, or else that they never left. This one, however, is different, rapidly bringing the technical but non-specialist reader up to speed in the principled construction of automated trading engines.

If you have a reasonably numerate background, perhaps with some software development experience, and have found yourself drawn to the concept of constructing your own mechanical trading system, you owe it to yourself to read this text. Quite simply, it is superb. The authors begin by describing the core components of a sound system, including the application of statistical inference and the selection of appropriate sample sets for back-testing. They then go on to provide a set of normalised comparisons of various trading 'rules' for entry and exit (e.g., breakouts, MAVs, oscillators, neural net predictors, etc.) together with discussion of optimisation systems (such as simulated annealing and genetic refinement). The actual results of some 'respectable' rulesets you may find rather shocking! And if you are only dimly aware of what genetic algorithms can offer the modern trader, you should buy this book for that reason alone.

The style of the text is clear and unstuffy, with chapters of readable length and well-structured content. The reader who wants to learn more will find this book an ideal jumping off point, since many references to the literature are provided, but an excessive technical background is not assumed, and the work is for the most part self-contained.

The only minor issues are 1) the title is a somewhat misleading; you will not find an A-Z list of trading strategies here, but rather a more select discussion of the techniques (and the validity of certain *classes* of strategy) involved in building viable automated trading systems; and 2) there is some ugleeee typesetting of mathematical formulae in Fortran (!). However, neither points really count for more than nitpicking in contrast to the value of the text overall.

In summary, there is real content here - described and justified, if you are an engineer like me, through the sort of scientific analysis and rigour that creates more excitement than a million words of hype. Fed up with TradeStation? Writing your own system in C++? In need of a bit of inspiration and guidance? If this sounds familiar, you want this book, believe me.

IMHO, it's a classic. Buy it.

The Encyclopedia Of Trading Strategies provides a solid foundation for developing the skills and knowledge base to develop one's own set of quantifiable trading rules and for developing a reliable trading "system."

The book begins laying the foundation with a description of the tools necessary to construct a system. Data -- the cleaner, naturally, the better -- is the point of departure. A discussion of simulators -- software that allows you to simulate trading -- ensues and walks you through the mechanics of interpreting output and determining their reliability and power.

A discussion of optimizers, or tools that find the best possible solutions to a problem follows, critically describing the major types of optimization and products available and how to achieve success, or failure, in their implementation.

Statistics for systems analysis are the next tool detailed. Without statistics, there is no way of knowing whether the profits (or losses) resulting from a tested system are real, an artifact of sampling or chance.

With the tools required for systems testing in place, the book launches into the discussion of its primary focus, the study of entries and exits. Ultimately, and deceptively simply, a trading system is nothing more than a system of entries and exits (at a profit or at a loss).

The Encyclopedia of Trading Strategies is something of a misnomer in that the title leaves the impression that one will find a catalogue of trading strategies and methods that the reader can scrutinize to extract specific techniques and use as a reference guide. In fact, the book provides the framework and background-knowledge necessary to design, test and analyze one's own trading system and could have as easily been dubbed A Primer On Developing Trading Systems.

This book is a review of trading strategies tested by the authors. Those strategies range from simple moving average crossing to neural networks- and genetic algorithms- based. The approach is simple - try all possible strategies and see how do they work. In this, the book under review is different from other books I've read - it cuts the discussion to the minimum and goes straight to the facts. I beleive that anybody who thinks of a building a automated trading system should read this book first. It may save him a valuable time of backtasting all the strategies and allow to concentrate on the most promising ones. Having said this, I took away one star because the C code snippets given in the book use some proprietary libraries and are mostly useless. In some parts, the authors skip the valuable details that will make you ask "why" a number of times as you read on.

This book is one of the best trading books ever published. It provides a very systematic and scientific approach of evaluating entry and exit techniques across a diversified futures portfolio. It presents by far the most rigorous and sound methodology of evaluating trading system robustness. The section on the use of statistical analysis to evaluate model validity is easily worth the price of the book.

The authors did an excellent job defining the correct way of optimizing system parameters. The part on exit techniques is also impressive. It contains a methodology on the development of exit strategies and presents many exit techniques.

Overall, the book is packed with a wealth of information. Every time I re-read a chapter I find a new gem. I strongly recommend this book to all mechanical system traders, especially those trading diversified commodity portfolios.

This may be a good book if one wants to build a trading system starting from writing the code with a language such as C++. Especially given the fact that one can order the software from the author.

The book also examines some of the most common trading strategies. However, having reviewed other books on this topic and given the title describes the book as an 'Encyclopedia of Trading Strategies", it would be a useful book but not all-encompassing as one may hope.

Overall a useful book, particularly for programmers. As a book on trading strategies it does give some valuable insights but other books on the topic come first..

2 stars

This book is well written and gives a good overview of most of the popular trading strategies. Both entry methods and exit methods are discussed. The various strategies are classified and then analyzed and back tested one by one in the following chapters.

Other issues such as statistical testing and optimization are also covered. However, this book does not provide details, such as statistical background, theory on genetic optimization, neural nets, etc. But then I guess that would be asking for a lot in one book.

If you are developing a trading system I would suggest you start with this book as it will save you a lot of time..........................

I would have saved countless hours if I had a book like this when I started developing trading systems with Omega Research TradeStation. It covers the basics: like you can't assume all stock data is good data. Then progresses into advanced and very advanced topics not found anywhere else besides inside the big institutions. It also goes into great detail on evaluating the performance of your simulations. A great read for the novice and the advanced trader.

When you begin studying the markets learning how to trade, you investigate many trading strategies. Your investigations lead you to develop a trading style, one unique to you, one that works for you. If you are serious about developing a trading system, consider buying this book and its companion CD. You can reproduce the results, modify the routines and expand the strategies in ways to suit your trading style tastes. It sure beats reinventing the wheel!

Thomas N. Bulkowski, author of the other Encyclopedia book: "Encyclopedia of Chart Patterns" (Wiley, 2000) and "Trading Classic Chart Patterns" (Wiley, due in spring 2002)

I hate reviewing books like this. It would be awesome to say, "this is total nonsense; never, ever read it." However, there is actually good stuff in it, which makes me work at reviewing it.
The good: the section on exits is quite good. It could be better, but I can't think of anything out there which actually is better. Selecting an exit strategy is *most* of a trading strategy. It matters a lot less when you buy than when you sell if you're into, like making a profit. I actually bought the book based on the recommendation of someone smarter than me, specifically for the chapters on exits, and I was not disappointed in this part. The sections on technical analysis and standard indicators aren't bad either, though like most treatments of this sort of thing, TA comes off looking like magic rather than what it properly should be thought of; which is to say, lousy non stationary filters which might inform other traders you should be trading against. His statistics aren't exactly right, but they're not always completely insane either.
The bad: this book is mostly an exercise in data mining and hindsight bias. Genetic algorithms? Optimizers? Give me a break! He doesn't deal with real issues in doing this sort of trading; for example, signal to noise ratios of various kinds. He doesn't properly deal with issues of overfitting (yes, you must test out of sample, but there is a whole lot more you can do to reassure yourself you haven't just fit to a bunch of noise). There is a chapter on fitting to solar and lunar cycles, which is, of course, data mining lunacy. The software he uses is of course all antiquated stuff which was out of date before I could legally drink alcoholic beverages; no help there. Risk management? Money management? These are also crucial pieces of any trading strategy: they're not covered at all here. I guess the book is oriented towards data mining punters who don't care so much about such niceties, but, well, I find such things important. I'm not sure I'd trust what the author had to say about such things, but it's something everyone with money on the line should be worrying about. Also: this is hardly anything resembling "an Encyclopedia of Trading Strategies" -so don't expect it to be, and you might not be disappointed.
So, this book can be useful if you already know enough to know which parts are nonsense. I guess this is an issue with all books and papers dealing with this subject; you can often take a chapter here and a section there, but books of this nature seem to have a lot of red herrings. Sometimes it's hard to tell if they are there on purpose, or as filler to sell the good sections. I dunno. Anyway, don't try to make a zillion dollars using genetic algorithms like they talk about in this book: you will fail.