The Encyclopedia of Trading Strategies

by Donna McCormick and Jeffrey Owen Katz

Book Overview

The Encyclopedia of Trading Strategies is for traders who want to take the next step to consistently profitable trading. The authors--themselves seasoned veterans of the futures trading arena--pinpoint the trading methods and strategies that have been shown to produce market-beating returns. Their rigorous and systematic backtesting of each method, using the same sets of markets and analytic techniques, provides a scientific, system-based approach...

• Format: Hardcover
• Language: English
• ISBN: 0070580995
• ISBN13: 9780070580992
• Release Date: March 2000
• Publisher: McGraw-Hill Companies
• Length: 376 Pages
• Weight: 2.02 lbs.
• Dimensions: 0.9" x 7.0" x 10.0"

Customer Reviews

One of the very best out there

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.

Indispensable for automated trading system builders!

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.

Good principles, good start for programming systems

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

Good overview of trading strategies

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..........................

Why wasn't there a book like this when I started trading?

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.