Quantitative trading strategies

Copyright......Page 5
ACKNOWLEDGMENTS......Page 8
CONTENTS......Page 9
PROLOGUE......Page 15
PART ONE Structural Foundations for Improving Technical Trading......Page 23
TRADING S RATEGIES AND THE SCIENTIFIC METHOD......Page 25
THE ORIGINS OF THIS BOOK......Page 27
THE SCIENTIFIC BENT AND QUANTITATIVE TRADING......Page 28
THE PIONEERS OF QUANTITATIVE TRADING......Page 31
THE RECENT EXPLOSION OF QUANTITATIVE TRADING......Page 32
TODAY’S QUANTITATIVE TRADERS......Page 33
WHY QUANTITATIVE TRADING IS SUCCESSFUL......Page 36
BIRTH OF A NEW DISCIPLINE......Page 43
TECHNOLOGY AND INEFFICIENCIES IN FINANCIAL MARKETS......Page 52
MERITS AND LIMITATIONS OF FUNDAMENTAL ANALYSIS......Page 55
MEASURING THE MARKETS USING STATISTICS......Page 61
MEASURING THE DISPERSION OF RETURNS......Page 62
CORRELATION......Page 64
THE USEFULNESS OF THE NORMAL DISTRIBUTION......Page 68
THE IRREGULARITY OF MARKE VOLATILITY......Page 71
THE RANGE OF VOLATILITIES......Page 72
THE LOGNORMALITY OF MARKET PRICES......Page 75
THE NEED TO EXPLAIN PRICE CHANGES......Page 77
TRADING STRATEGY ENTRIES......Page 78
TRADING STRATEGY EXITS......Page 91
Trading Strategy Filters......Page 94
CREATING NEW STRATEGIES......Page 95
POPPER’S THEORIES APPLIED TO TRADING......Page 97
FLAWS IN PERFORMANCE MEASURES......Page 98
BETTER MEASURES OF TRADING PERFORMANCE......Page 106
PERFORMANCE EVALUATION TEMPLATES......Page 112
THE “HALF LIFE” OF STRATEGY PERFORMANCE......Page 116
GOLD MINES OF BAD PERFORMANCE......Page 119
THE FALLACY OF MAGICAL THINKING......Page 120
LESSONS LEARNED FROM A CASINO......Page 121
THE BENEFITS OF DIVERSIFICATION......Page 122
DON’T PUT ALL YOUR EGGS IN ONE BASKET......Page 124
THE BEST DIVERSIFICATION: ACROSS MARKETS......Page 126
BETTER DIVERSIFICATION: ACROSS UNCORRELATED STRATEGIES......Page 127
GOOD DIVERSIFICATION: ACROSS PARAMETERS WITHIN STRATEGIES......Page 128
THE TRADER’S HOLY GRAIL......Page 129
OPTIMIZING TRADING SIGNALS TO ENHANCE PROFITABILITY......Page 131
FILTERING TO ENHANCE PROFITABILITY......Page 139
HOW OFTEN DO MARKETS TREND?......Page 146
PART TWO Harnessing the Power of Quantitative Techniques to Create a Trading Program......Page 149
TESTING STOCK AND FUTURES MARKETS......Page 151
CONSTRUCTING CONTINUOUS FUTURES CONTRACTS......Page 152
NORMALIZING STOCK AND FUTURES VOLATILITY......Page 155
PERFORMANCE OF POPULAR STRATEGIES......Page 161
A BASELINE FOR FUTURE TRADING STRATEGIES......Page 197
A WOLF IN SHEEP’S CLOTHING......Page 203
11 NEW TRADING TECHNIQUES......Page 204
THE VALUE OF STOP LOSS EXITS......Page 258
PYRAMIDING VS. PROFIT TAKING......Page 264
NEW TREND FILTERS......Page 265
THE WORLD OF RELATIVE VALUE TRADING......Page 269
INTRODUCING RELATIVE VALUE MARKETS......Page 273
DEVELOPING STRATEGIES FOR RELATIVE VALUE MARKETS......Page 288
APPLYING QUANTITATIVE TRADING STRATEGIES TO RELATIVE VALUE MARKETS......Page 289
NEW MARKETS, NEW OPPORTUNITIES......Page 305
THE POPULARITY OF EQUITIES......Page 311
THE IMPORTANCE OF INTEREST RATES IN PREDICTING EQUITY PRICES......Page 314
TESTING MEDIUM-TERMS STRATEGIES......Page 316
SHORT-TERM TRADING METHODOLOGIES......Page 317
THE IMPORTANCE OF MONEY MANAGEMENT......Page 327
THE RELATIONSHIP BETWEEN LEVERAGE AND RETURNS......Page 328
THE DANGER OF LEVERAGE......Page 333
LEVERAGE IN THE REAL WORLD......Page 335
THE KELLY CRITERIA......Page 337
AN IMPROVED METHOD FOR CALCULATING OPTIMAL LEVERAGE......Page 338
THE ROLE OF DOLLAR AND PERCENTAGE RETURNS......Page 340
THE PARADOX OF OPTIMAL LEVERAGE......Page 341
CREATING THE STRATEGY......Page 343
TES ING THE NEW STRATEGY......Page 346
DETERMINING OPTIMAL LEVERAGE......Page 347
In Conclusion......Page 351
References......Page 353
INDEX......Page 357
ABOUT THE AUTHOR......Page 367