Trading Systems and Methods (Wiley Trading)

PREFACE
	THE MOVE TOWARD MORE ALGORITHMIC APPROACH
	COMPETITION
	ACCEPTING RISK
	THE LONG BULL MARKET
	WHAT'S NEW IN THE SIXTH EDITION
	COMPANION WEBSITE
	WITH APPRECIATION
CHAPTER 1: Introduction
	THE EXPANDING ROLE OF TECHNICAL ANALYSIS
	CONVERGENCE OF TRADING STYLES IN STOCKS AND FUTURES
	PROFESSIONAL AND AMATEUR
	RANDOM WALK
	DECIDING ON A TRADING STYLE
	MEASURING NOISE
	MATURING MARKETS AND GLOBALIZATION
	BACKGROUND MATERIAL
	SYSTEM DEVELOPMENT GUIDELINES
	OBJECTIVES OF THIS BOOK
	PROFILE OF A TRADING SYSTEM
	A WORD ABOUT THE NOTATION USED IN THIS BOOK
	A FINAL COMMENT
CHAPTER 2: Basic Concepts and Calculations
	A BRIEF WORD ABOUT DATA
	SIMPLE MEASURES OF ERROR
	ON AVERAGE
	PRICE DISTRIBUTION
	MOMENTS OF THE DISTRIBUTION: MEAN, VARIANCE, SKEWNESS, AND KURTOSIS
	CHOOSING BETWEEN FREQUENCY DISTRIBUTION AND STANDARD DEVIATION
	MEASURING SIMILARITY
	STANDARDIZING RISK AND RETURN
	THE INDEX
	AN OVERVIEW OF PROBABILITY
	SUPPLY AND DEMAND
	NOTES
CHAPTER 3: Charting
	FINDING CONSISTENT PATTERNS
	WHAT CAUSES THE MAJOR PRICE MOVES AND TRENDS?
	THE BAR CHART AND ITS INTERPRETATION BY CHARLES DOW
	CHART FORMATIONS
	TRENDLINES
	ONE-DAY PATTERNS
	CONTINUATION PATTERNS
	BASIC CONCEPTS IN CHART TRADING
	ACCUMULATION AND DISTRIBUTION: BOTTOMS AND TOPS
	EPISODIC PATTERNS
	PRICE OBJECTIVES FOR BAR CHARTING
	IMPLIED STRATEGIES IN CANDLESTICK CHARTS
	PRACTICAL USE OF THE BAR CHART
	EVOLUTION IN PRICE PATTERNS
	NOTES
CHAPTER 4: Charting Systems
	DUNNIGAN AND THE THRUST METHOD
	NOFRI'S CONGESTION-PHASE SYSTEM
	OUTSIDE DAYS AND INSIDE DAYS
	PIVOT POINTS
	ACTION AND REACTION
	PROGRAMMING THE CHANNEL BREAKOUT
	MOVING CHANNELS
	COMMODITY CHANNEL INDEX
	WYCKOFF'S COMBINED TECHNIQUES
	COMPLEX PATTERNS
	COMPUTER RECOGNITION OF CHART PATTERNS
	NOTES
CHAPTER 5: Event-Driven Trends
	SWING TRADING
	POINT-AND-FIGURE CHARTING
	THE N-DAY BREAKOUT
	NOTES
CHAPTER 6: Regression Analysis
	COMPONENTS OF A TIME SERIES
	CHARACTERISTICS OF THE PRICE DATA
	LINEAR REGRESSION
	LINEAR CORRELATION
	NONLINEAR APPROXIMATIONS FOR TWO VARIABLES
	TRANSFORMING NONLINEAR TO LINEAR
	MULTIVARIATE APPROXIMATIONS
	ARIMA
	BASIC TRADING SIGNALS USING A LINEAR REGRESSION MODEL
	MEASURING MARKET STRENGTH
	NOTES
CHAPTER 7: Time-Based Trend Calculations
	FORECASTING AND FOLLOWING
	PRICE CHANGE OVER TIME
	THE MOVING AVERAGE
	THE MOVING MEDIAN
	GEOMETRIC MOVING AVERAGE
	ACCUMULATIVE AVERAGE
	DROP-OFF EFFECT
	EXPONENTIAL SMOOTHING
	PLOTTING LAGS AND LEADS
	NOTES
CHAPTER 8: Trend Systems
	WHY TREND SYSTEMS WORK
	BASIC BUY AND SELL SIGNALS
	BANDS AND CHANNELS
	CHOOSING THE CALCULATION PERIOD FOR THE TREND
	A FEW CLASSIC SINGLE-TREND SYSTEMS
	COMPARISON OF SINGLE-TREND SYSTEMS
	TECHNIQUES USING TWO TRENDLINES
	THREE TRENDS
	COMPREHENSIVE STUDIES
	SELECTING THE TREND SPEED TO FIT THE PROBLEM
	MOVING AVERAGE SEQUENCES: SIGNAL PROGRESSION
	EARLY EXITS FROM A TREND
	PROJECTING MOVING AVERAGE CROSSOVERS
	EARLY IDENTIFICATION OF A TREND CHANGE
	NOTES
CHAPTER 9: Momentum and Oscillators
	MOMENTUM
	ADDING VOLUME TO MOMENTUM
	DIVERGENCE INDEX
	VISUALIZING MOMENTUM
	OSCILLATORS
	DOUBLE-SMOOTHED MOMENTUM
	VELOCITY AND ACCELERATION
	HYBRID MOMENTUM TECHNIQUES
	MOMENTUM DIVERGENCE
	SOME FINAL COMMENTS ON MOMENTUM
	NOTES
CHAPTER 10: Seasonality and Calendar Patterns
	SEASONALITY NEVER DISAPPEARS
	THE SEASONAL PATTERN
	POPULAR METHODS FOR CALCULATING SEASONALITY
	CLASSIC METHODS FOR FINDING SEASONALITY
	WEATHER SENSITIVITY
	IDENTIFYING SEASONAL TRADES
	SEASONALITY AND THE STOCK MARKET
	COMMON SENSE AND SEASONALITY
	NOTES
CHAPTER 11: Cycle Analysis
	CYCLE BASICS
	UNCOVERING THE CYCLE
	MAXIMUM ENTROPY
	SHORT CYCLE INDICATOR
	PHASING
	NOTES
CHAPTER 12: Volume, Open Interest, and Breadth
	FUTURES VOLUME AND OPEN INTEREST
	EXTENDED HOURS AND 24-HOUR TRADING
	VARIATIONS FROM THE NORMAL PATTERNS
	STANDARD INTERPRETATION
	VOLUME INDICATORS
	BREADTH INDICATORS
	IS ONE VOLUME OR BREADTH INDICATOR BETTER THAN ANOTHER?
	MORE TRADING METHODS USING VOLUME AND BREADTH
	AN INTEGRATED PROBABILITY MODEL
	INTRADAY VOLUME PATTERNS
	FILTERING LOW VOLUME
	MARKET FACILITATION INDEX
	NOTES
CHAPTER 13: Spreads and Arbitrage
	DYNAMICS OF FUTURES INTRAMARKET SPREADS
	CARRYING CHARGES
	SPREADS IN STOCKS
	SPREAD AND ARBITRAGE RELATIONSHIPS
	RISK REDUCTION IN SPREADS
	ARBITRAGE
	THE CARRY TRADE
	IMPLIED VERSUS HISTORIC VOLATILITY
	CHANGING SPREAD RELATIONSHIPS
	INTERMARKET SPREADS
	NOTES
CHAPTER 14: Behavioral Techniques
	MEASURING THE NEWS
	EVENT TRADING
	COMMITMENT OF TRADERS REPORT
	OPINION AND CONTRARY OPINION
	FIBONACCI AND HUMAN BEHAVIOR
	ELLIOTT'S WAVE PRINCIPLE
	PRICE TARGET CONSTRUCTIONS USING THE FIBONACCI RATIO
	FISCHER'S GOLDEN SECTION COMPASS SYSTEM
	W. D. GANN: TIME AND SPACE
	FINANCIAL ASTROLOGY
	NOTES
CHAPTER 15: Short-Term Patterns
	PROJECTING DAILY HIGHS AND LOWS
	TIME OF DAY
	OPENING GAPS
	WEEKDAY, WEEKEND, AND REVERSAL PATTERNS
	COMPUTER-BASED PATTERN RECOGNITION
	ARTIFICIAL INTELLIGENCE METHODS
	NOTES
CHAPTER 16: Day Trading
	IMPACT OF TRANSACTION COSTS
	SLIPPAGE AND LIQUIDITY
	KEY ELEMENTS OF DAY TRADING
	TRADING USING PRICE PATTERNS
	INTRADAY BREAKOUT SYSTEMS
	HIGH-FREQUENCY TRADING
	INTRADAY VOLUME PATTERNS
	INTRADAY PRICE SHOCKS
	NOTES
CHAPTER 17: Adaptive Techniques
	ADAPTIVE TREND CALCULATIONS
	ADAPTIVE VARIATIONS
	OTHER ADAPTIVE MOMENTUM CALCULATIONS
	ADAPTIVE INTRADAY BREAKOUT SYSTEM
	AN ADAPTIVE PROCESS
	NOTES
CHAPTER 18: Price Distribution Systems
	ACCURACY IS IN THE DATA
	USE OF PRICE DISTRIBUTIONS AND PATTERNS TO ANTICIPATE MOVES
	THE IMPORTANCE OF THE SHAPE OF THE DISTRIBUTION
	A PURCHASER'S INVENTORY MODEL
	A PRODUCER'S SELLING MODEL
	STEIDLMAYER'S MARKET PROFILE
	A FAST VERSION OF MARKET PROFILE
	NOTES
CHAPTER 19: Multiple Time Frames
	TUNING TWO TIME FRAMES TO WORK TOGETHER
	DISPLAYING TWO OR THREE TIME FRAMES
	ELDER'S TRIPLE SCREEN TRADING SYSTEM
	ROBERT KRAUSZ'S MULTIPLE TIME FRAMES
	MARTIN PRING'S KST SYSTEM
	NOTES
CHAPTER 20: Advanced Techniques
	MEASURING VOLATILITY
	THE PRICE-VOLATILITY RELATIONSHIP
	USING VOLATILITY FOR TRADING
	LIQUIDITY
	TRENDS AND PRICE NOISE
	TRENDS AND INTEREST RATE CARRY
	FUZZY LOGIC
	EXPERT SYSTEMS
	GAME THEORY
	FRACTALS, CHAOS, AND ENTROPY
	GENETIC ALGORITHMS
	NEURAL NETWORKS
	MACHINE LEARNING AND ARTIFICIAL INTELLIGENCE
	REPLICATION OF HEDGE FUNDS
	NOTES
CHAPTER 21: System Testing
	EXPECTATIONS
	SELECTING THE TEST DATA
	TESTING INTEGRITY
	IDENTIFYING THE PARAMETERS
	SEARCHING FOR THE BEST RESULT
	TOO LARGE TO TEST EVERYTHING
	VISUALIZING AND INTERPRETING TEST RESULTS
	THE IMPACT OF COSTS
	REFINING THE STRATEGY RULES
	ARRIVING AT VALID TEST RESULTS
	COMPARING THE RESULTS OF TWO TREND SYSTEMS
	RETESTING TO STAY CURRENT
	PROFITING FROM THE WORST RESULTS
	TESTING ACROSS A WIDE RANGE OF MARKETS
	PRICE SHOCKS
	ANATOMY OF AN OPTIMIZATION
	SUMMARIZING ROBUSTNESS
	NOTES
CHAPTER 22: Adding Reality
	SOME COMPUTER BASICS
	THE ABUSE OF POWER
	FINAL STEPS BEFORE LAUNCH
	EXTREME EVENTS
	GAMBLING TECHNIQUES: THE THEORY OF RUNS
	SELECTIVE TRADING
	SYSTEM TRADE-OFFS
	SILVER AND AMAZON: TOO GOOD TO BE TRUE
	SIMILARITY OF SYSTEMATIC TRADING SIGNALS
	NOTES
CHAPTER 23: Risk Control
	MISTAKING LUCK FOR SKILL
	RISK AVERSION
	LIQUIDITY
	MEASURING RETURN AND RISK
	POSITION SIZING
	INDIVIDUAL TRADE RISK
	KAUFMAN ON STOPS AND PROFIT-TAKING
	ENTERING A POSITION
	LEVERAGE
	COMPOUNDING A POSITION
	SELECTING THE BEST MARKETS
	PROBABILITY OF SUCCESS AND RUIN
	MANAGING EQUITY RISK
	IDEAL LEVERAGE USING OPTIMAL f
	COMPARING EXPECTED AND ACTUAL RESULTS
	NOTES
CHAPTER 24: Diversification and Portfolio Allocation
	DIVERSIFICATION
	TYPES OF PORTFOLIO MODELS
	CLASSIC PORTFOLIO ALLOCATION CALCULATIONS
	FINDING OPTIMAL PORTFOLIO ALLOCATION USING EXCEL'S SOLVER
	KAUFMAN'S GENETIC ALGORITHM SOLUTION TO PORTFOLIO ALLOCATION (GASP)
	VOLATILITY STABILIZATION
	NOTES
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