Customer Reviews

Professional Stock Trading: System Design and Automation

5 star:		(21)
4 star:		(5)
3 star:		(2)
2 star:		(1)
1 star:		(2)

 

 

I like this book--even though I don't have TradeStation to actually try the source code out on. It's a great nuts-and-bolts look at the actual step-by-step coding of several different sample systems. I recommend this for any novice trading system developer using the TradeStation platform. For non-TradeStation owners, I don't particularly recommend it, as many of the useful tidbits found in the explanatory parts of the book are drawn from other famous trading books. Without TradeStation, most of the book is rendered useless. Still, I was able to make use of the book because I am a programmer and can convert the tons of provided source code into Wealth-Lab Developer or Amibroker's proprietary languages. And the sample systems gave me some great ideas on how I can improve my existing systems.

Massachusetts district court has sentenced former hedge fund manager Mark R. Conway to seven years in prison and three years of supervised release for defrauding investors out of $20 million.

The court also ordered Conway to pay a $1,300 fine and $20 million in restitution. On October 23, 2006, Conway pled guilty to 13 counts of wire and mail fraud in connection with his scam. According to the SEC, the District Attorney's office has taken $15 million from Conway's bank accounts to be returned to the roughly 50 investors who put money into his bogus Groundswell Partners and Groundswell Capital investments.

The Commission based a large portion of its case against Conway on a tape-recorded phone conversation with Conway's Groundswell partner, Aaron Behle. During the October 26, 2005 conversation, Conway admitted to Behle that he had used the fund to defraud investors from roughly 2000 or 2001 to October 2005.

Conway also admitted that he had taken a sizeable position in a stock and lost a large amount of the fund's money, and that he had changed his investment strategy without notifying investors. The original investment strategy was purportedly based on quantitative and mathematical algorithms that capitalized on daily price movements in order to earn incremental positive daily returns.

In the course of the taped conversation, Conway also told Behle that he concealed the huge losses incurred by the fund by altering financial statements, profit-and-loss spreadsheets, and account statements to investors, which falsely inflated the amount of assets in investors' accounts. Conway falsely told investors that the fund's assets were at roughly $43 million, when they were closer to $14 million.

Because Conway's salary was based partly on annual 1% commission of the amount of assets under his management, which he fraudulently overstated, he also overcharged investors for his advisory services, charged the complaint.

To keep the fraud going, Conway also created a fictitious auditor, complete with a made-up email account, for the purpose of creating fraudulent auditing reports for the fund, stated the complaint.

The day after his taped conversation, Conway phoned the Commission's Boston District Office. He told a staffer that he wished to turn himself into SEC Enforcement the next day for an unspecified fraud that he had committed. But according to the regulator, Conway failed to appear at the Boston District Office.

As for Groundswell Partners and Groundswell Capital LP, the Commission obtained default judgments against both entities on June 30, 2006. The company was also ordered to pay disgorgement and prejudgment interest totaling more than $21 million. The court permanently enjoined Groundswell Partners from further violations of the federal securities laws.

Conway's sentencing is the end of just one of several actions taken by the Commission related to hedge fund fraud this year.

In May, the U.S. District Court in Boston enforced an asset freeze on hedge fund Lydia Capital and its two owners. The SEC had charged the defendants with defrauding over 60 clients who had invested approximately $34 million in the fund. In that case, the Court froze over $13 million in assets.

Earlier this year, a Georgia District Court fined an Atlanta-based hedge fund manager $20 million for his part in a fraudulent offering that bilked over 500 investors, including some professional football players, out of close to $185 million. At the time, the former hedge fund manager was already in jail on 23 counts of money laundering and 24 counts of mail and securities fraud.

If you're looking for some light reading on trading systems, this is not the title for you. But if what you want are detailed, well fleshed-out trading systems to study as examples or even to use, this is an outstanding library of ideas that are fully implemented as code. The focus on TradeStation as the platform is only mildly distracting if you're using a different programming approach, there is enough detail here to go your own way with another language. It will take quite some time to dig through everything because the prose isn't quite as clear as it could be in spots, but the time spent will easily pay off to the serious student of trading systems.

I purchased this book several months ago and was initially overwhelmed by the code in the book, which is written in TradeStation's EasyLanguage. At its most basic level, the code consists of systems and indicators for finding traditional technical analysis patterns such as triple tops and pennants, but the book also presents some advanced concepts for combining and encoding these patterns on a chart, including a system using sentiment measures that is absolutely brilliant. The book contains many chart examples, but I would have been keen to see the specific parameters that were applied to each chart. You must be able to commit many hours experimenting with different combinations of input parameters and the so-called filters such as moving averages, volatility ratios, and other metrics. You cannot just plug the systems into your charts and expect stellar results for every symbol, as Conway & Behle explain in the first chapter; however, I think they present a good methodology for stock selection (I currently use RadarScreen to scan for trading candidates - you have to make sure all of the Acme indicators are enabled for RadarScreen). The chapters on pairs trading and float analysis were interesting because this content is rarely covered in other technical analysis books; however, I found the pairs trading difficult to backtest, so this system is probably the most subjective of all the systems. The authors present an intraday pairs system, but I would have been keen to see a daily system, so I'm trying to convert the code to do this. To summarise, this work has proven to be an extremely valuable book and put money in my pocket after much labour. I think some people will just give up if they think they can just plug a canned system into a chart, but this book proves there are many ways to skin a cat, and thus I highly recommend it.

Where do I begin? The book is a survey of trading systems wrapped in technical analysis within a software framework. And that is the genius of the book: it ties everything together for the mechanical trader. While the text seemed familiar, it covered bits and pieces that I haven't seen before in other books. So, one can learn about pairs trading and float analysis but even better have a free code framework for multiple trading systems. For example, the programmer is able to select among several position sizing models taken from Tharp's book. Moreover, modules for trade management are provided to implement stop losses and profit targets.

Yes, the systems run out of the box, but I can see why some will be disappointed. These guys aren't handing over the Holy Grail, but then who does? That is not to discount a few of the systems in the book -- they were clearly designed by inventive programmer(s) with sound principles. In fact, two of the systems test very well historically. Given the proliferation of pattern-based trading, I believe this book advances the ball by providing more (yet not complete) accountability by authors of trading books.

So is this book for professional stock traders? Yes, in the sense that it presents a disciplined approach to trading multiple systems and unifying these systems through a common trade management model. The code is modular and could (may) have been written by a very good software engineer. The only deficiencies are the lack of system settings for each chart and comprehensive performance results for all of the systems. I recommend this book and am a satisfied customer.

It's as if these authors came into my firm and took a full inventory of our needs and frustrations. I've never seen a more organized package of what's important. It's all there.

I've read over 100 books...Stridsman, Kaufman, Crabel, Conners, Geitzen, Murphy, Balsara, Vince, Kase, Zweig, Demark, Tharp, etc. At this point I must bump Stridsman's book down to second place. Professional Stock Trading is a real difference-maker.

If you want to make it as a trader buy this book and UNDERSTAND the significance of position sizing and relative volatility measures.

This book is outstanding.

I give credit to these guys for providing the complete system rules for entries and exits along with some position sizing algorithms. There are many, many books on patterns, and few of them ever give performance statistics. At least with this code you can import it into TradeStation and be up and running in a matter of minutes. That said, some of the systems are good and some are not so good. I suspect that the pairs trading system might have worked when there was intraday volatility but the market has changed since then. The linear regression system (V) is good and should be applied to momo stocks. It has been phenomenal in this market, don't think I'd use it in a bear market. There is another system in the book that is even better but I'm not gonna say here. It's my bread-and-butter, so there ;-).

It's an enjoyable book. Discretionary trading strategies are incorporated into a mechanical frame by means of a Tradestation platform. Most of the systems incorporate well-known price pattern concepts, with the exception of the float analysis system. The novice trader will obtain some good ideas on how to develop a trading system, with the exception on the issues regarding testing and optimization.

Most of the systems incorporate the concept of price contraction/expansion and trading performance is mainly dependent on price volatility. These types of systems are a natural consequence of the bubble trading environment where prices surpassed normal levels of historical volatility by leaps and bounds. The trading environment is quite different now, as the recent rise in the markets is marked by low price volatility. This environment tends to favor trend following systems, something that the book does not present.

Stock selection and stop placement is a bit confusing. First, the position modelling incorporates an ATR factor of 1. The entry/exit default models call for a 0.3ATR trigger above and below the high/low. From the get go, the max. loss potential is 2*0.3+body of the bar, which in most cases will be greater than 1ATR. The exception to the case will be in the narrow range models, where the body of the previous bar may be small enough to limit stop loss at 1ATR. The other dubious issue is stock scanning and selection. It is not clear whether the authors trade the system on a stock for an extended period of time, or whether they scan the markets for stocks that meet the filtering criteria and perform a quick test to determine performance. If the latter, then the trading system works as an automated discretionary system rather than "mechanical" on its true meaning. The latter approach does not take advantage of the statistical edge of a system when only traded a few times in a certain stock, and becomes a random event.

The filtering seems somewhat very restrictive and the ATR trigger rather than the high or low of the bar is not convincing. I have developed and traded narrow range systems where the high/low of the bar works as a better triggering mechanisms. This is because of the nature of the stocks that the authors tend to favor in their selection. The filtering on the narrow range system is restrictive, and when traded on a single stock for a considerable period of time on a daily timeframe, the user might be disappointed.

But overall, the book is an excellent addition to your trading library.

First of all, I am amazed that the authors have been so generous in sharing this code, pages and pages of TradeStation code for various technical analysis patterns. This is clearly the result of many years of hard work of developing and testing trading systems. My only caution is that this book may not be for beginning traders - the book jumps right into a fairly technical 40-page introduction about their trading model and systems, which are all standardized on volatility, a brilliant stroke. Lots of good trading system ideas outside of the realm of traditional technical analysis...

If nothing else, get this book for its rich code base. I downloaded the code from the TradeStationWorld site to save myself the typing. Yes, you do need to subscribe to TradeStation to use the code (the code is written in a Basic-like language for trading called EasyLanguage).

I have been a subscriber to TradeStation for a long time. The authors are generous contributors of articles and free code to the TradeStation community and are well-respected. I would check out their article that uses combinations of sentiment indicators, taken from Chapter 8 in the book.