Beyond Technical Analysis: How to Develop and Implement a Winning Trading System

This book will give you the tools and show you how to use them to propel yourself above the “average” on-line trader !!

I would suggest that most people who will find this review helpful will possibly already be using a trading platform on line, will have a basic grasp of trading or may have been trading for years and wondered why they weren’t retiring yet!! You should be interested in developing your own “Trading System”.
I wouldn’t however dissuade novices from buying this book, in fact I would suggest it be the first book you buy and read on the subject, however, I would urge you to “paper-trade” and explore the technical indicators offered by your platform provider first. This will help familiarise yourself with the terminology and technical detail in the book and its relevance to your own trading style. This book is relevant to all markets though most of the examples are futures orientated.

Most of you will have read “market wizards”; “Trading for dummies”; “Give up your day job and make millions on line” etc etc etc the reality is a lot harder as we all know, otherwise everyone would be doing it.

I bought this book for two main reasons, the first because I was fed up with the vague descriptions of the more obscure technical indicators found on trading platforms. Most platforms have 50+ Tech’ indicators but almost no-one can tell you how to use anything more complicated than an MA and half the people I have asked can’t tell you the difference between converge and diverge. Trust me, the people that spent their time developing these indicators didn’t do it so they look pretty on a chart, they had to be there for a reason and they had too help make someone money, I wanted to know what that reason was and whether it would benefit me. I wished to build my own system and wanted to know how the commonly available indicators could be used within that structure and how they could be modified to fit my trading style / system.

The second reason was a little obscure; as I was reading some of the available file within Sacred Traders web-site there was a reference to “Trend Trading systems”. I am keen to develop my own trend system of trading rather than a “semi-educated speculation” that may or may not pay-off.

Another highly recommended read is “Trend Following” by Michael Covel of Turtle Trader fame. Incidentally the “Turtle” books did nothing for me other than tell anecdotes and I would say “save your money and buy “Trend Following” instead”.

This book only failed on one account. Few of the more obscure technical indicators are even mentioned, though having read the book you wonder why they would ever need to be used or considered in a trading system and one is left wondering if there not put there just to confuse us and give us false triggers or signals !! The book also covers trading rules and how to write them. We’ve all got them “yeah right!” We say we have but how do we know there the right rules, be honest how often do you read them and more importantly, how often do you break them, every trade, one trade in two ………..It also covers in depth, back testing and results analysis, what does the performance data tell you and what does it miss; data sources and there relevance to your system / market / future performance.

Particularly interesting are the studies on stops, the necessity of proper volatility analysis, size and positioning and how the stop affects your results over varying periods. (Ever wondered why your stop always seems to be hit just before the massive break out you predicted? )
There is an excellent section on money management, risk / reward analysis; draw-downs and how to deal with them.

Most importantly it tells you step by step how to put all this together to create, test, analyze and implement your own trading system and why you shouldn’t be risking your capital without one.

I am certain that most brokers don’t want you to be this clued up and if you bother to implement 1/10th of the contents of this book I would hazard a guess that you would be parachuted into the top 10% of on-line traders such is the leap forward in understanding that this book provides.

Its not stuffy or pretentious there isn’t one anecdote from a wall street hot shot or wanna-be journalist / author, it is simply a “how too ….” book and probably the best as well!!

The only warning I would offer any potential purchaser is that this book is, by it’s very nature, maths orientated. That’s not to suggest that if you didn’t get a maths degree don’t read it. To be fair the maths formulas, equations, building your own indicators etc, can all be skipped if it looks like double-dutch to you.

So, if you want to develop a trading system of your own that matches your beliefs and therefore enables you to trade “stress free”, if you want to really understand indicators and how to use them effectively, if you’ve heard of trading systems and back-testing but didn’t realise its importance, if your aware of “trends” and the huge profits made from them and want to know why trend systems make more money than any other, if you know you should have trading “rules” but aren’t sure were to start and if you want to explore a new way of dealing with the anxiety of trading then this will give you a step by step guide in layman’s terms.

I have read a lot of books about the market, and most of them are full of systems that the author thinks might work, or that they used years ago as a floor trader. These systems, are short on hard facts and numbers and use a lot of terms like “when it nears”, or be sure not to trade on a “big news day”, or beware “rising short interest” or a “shift in dynamics”. In other words if you knew everything, saw everything and had god like insight it might work.

This book is much more based on reality, systems are quantified in code and results displayed with real numbers like profit factors and draw downs, that’s reality. Its refreshing to see a work where some real work has been done.

The author is one of the few modern pioneers in technical analysis that are breaking new ground now and not riding on some indicator they formulated 25 years ago.

I loved this book. It’s more academic than an introductory look at trading. I’ve been studying for the CMT and have been trading for over 25 years and this book is not for the faint of heart. I enjoyed the combination of tables/charts/commentary because, as a technical analyst, visual representation is important. I would recommend this book to the advanced traders out there.

I’m a bit surprised by some of the negative reviews of this book. I’ve got most of the popular books on building mechanical trading systems – eg. Kaufman, Katz, Faith, Pardo, Pring, and a few others I can’t remember off the top of my head. And I would say this is one of the more useful books on the subject.

Another reviewer suggested that some of the systems were weak – I guess he means they’re not incredibly profitable in their generic form. Well, I read books like this simply for some new ideas that I can take away to work on myself.

After all, where’s the fun of having all the work done for you by someone else? If in my dotage I ever find the energy to write a book on system design, you can bet I won’t give away my most profitable systems in their finished form. I’ve spent far too many years and tens of thousands of dollars perfecting them. Why would I give that away to some lazy so and so for a few bucks?

The value of this book is that it has a few fairly original ideas (and more than a few conventional ones) that can form the basis for further research. Some of the material may be beyond the novice trader, but intermediate to advanced mechanical traders will probably find something of value here. And Chande’s discussion of equity curves and data scrambling is significantly better than many other books on the subject.

Summary from my full length review – Great introduction to trading system design. Not too complex, not too dry. Detail enough to be the text book on trading system design if it were used in a college degree course. The examples in the book are easy to understand even if you are not using TradeStation. Some statistics background necessary. Highly recommended as the introductory text for anyone interested in developing mechanical trading models.

I have started reading and almost 40% done. So for its good and giving me really what i was looking for.
Develop simple strategies and analysing them. Gives helpful infomation to enable one to create a new strategy or improvise on the existing stretegies.
Only problem I found, makes references to charts that are 2 -3 pages further out , this keeps us constantly going back and forth. A real distraction.

This is an excellent source of trading knowledge.

Clearly, a lot of work went into this book. There are detailed calculations and plenty of testing are included to help a trader see how a system may be constructed. However, I personally prefer simplicity over complications/programs/fancy narratives. so for me this book didn’t really work. Also there are many similar works, step by step guides to “building a system” with lower price tags with just as many complicated calculations etc. SOOO for overcomplicated and overpriced: 2.5 stars are taken off.

Book straight forward. Basics with some advanced topics, but then I always solid foundational info is always far more important than we traders tend to forget. Its always a lot more fun to search for the holy grail rather than look at perfecting our foundational trading. Great foundational info here, great advanced tips along the way. Good book.