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 to system development to help you assemble the trading system that will put you on the road to becoming a more consistently profitable trader.
In this book is the knowledge needed to become a more successful trader of com-modities. As a comprehensive reference and system developer’s guide, the book explains many popular techniques and puts them to the test, and explores innova-tive ways to take profits out of the market and to gain an extra edge. As well, the book provides better methods for controlling risk, and gives insight into which methods perform poorly and could devastate capital.
Even the basics are covered: information on how to acquire and screen data, how to properly back-test systems using trading simulators, how to safely perform optimization, how to estimate and compensate for curve-fitting, and even how to assess the results using inferential statistics. This book demonstrates why the surest way to success in trading is through use of a good, mechanized trading system.
For all but a few traders, system trading yields mm-e profitable results than discretionary trading. Discretionary trading involves subjective decisions that fre-quently become emotional and lead to losses. Affect, uncertainty, greed, and fear easily displace reason and knowledge as the driving forces behind the trades. Moreover, it is hard to test and verify a discretionary trading model. System based trading, in contrast, is objective. Emotions are out of the picture.
Through programmed logic and assumptions, mechanized systems express the trader’s reason and knowledge. Best of all, such systems are easily tested: Bad systems can be rejected or modified, and good ones can be improved. This book contains solid information that can be of great help when designing, building, and testing a profitable mechanical trading system. While the emphasis is on an in-depth, critical analysis of the various factors purported to contribute to winning systems, the essential elements of a complete, mechanical trading system are also dissected and explained.
To be complete, all mechanical trading systems must have an entry method and an exit method. The entry method must detect opportunities to enter the mar-ket at points that are likely to yield trades with a good risk-to-reward ratio. The exit method must protect against excessive loss of capital when a trade goes wrong or when the market turns, as well as effectively capture profits when the market moves favorably.
A considerable amount of space is devoted to the systematic back-testing and evaluation of exit systems, methods, and strategies. Even the trader who already has a trading strategy or system that provides acceptable exits is likely to discover something that can be used to improve the system, increase profits, and reduce risk exposure.
- Optimizers and Optimization
- Breakout Models
- Moving Average Models
- Oscillator-Based Entries
- Lunar and Solar Rhythms
- Cycle-Based Entries
- Neural Networks
- Genetic Algorithms
- The Standard Exit Strategy
- Improvements on the Standard Exit
- Adding Artificial Intelligence to Exits