Mechanical Trading Systems

Product Description

A wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory
Mechanical Trading Systems examines the development process for choosing and using mechanical trading systems in conjunction with trader psychology. This book discusses the advantages and disadvantages of mechanical trading systems; the dangers in system development and how to avoid them; the optimal methods for back-testing trading systems; position sizing and other risk quantification tools; and methods of improving rates of return on investments without significantly increasing risk. Most importantly, through a detailed examination of various types of unsuccessful trader personality traits (e.g., fearfulness, greed, and impatience), the book recommends different types of trading systems for a diverse array of trader types.
Richard L. Weissman (Port Richey, FL) has seventeen years' experience as a trader and developer of trading systems. He currently provides independent consultation an d training services to traders and risk management professionals in the areas of technical analysis, risk management, and trader psychology.
Product Details

* Amazon Sales Rank: #128874 in Books
* Published on: 2004-12-03
* Original language: English
* Number of items: 1
* Binding: Hardcover
* 217 pages

Editorial Reviews

Review
"The book is highly recommended for almost anyone involved in trading, forecasting, or studying the markets." (Technical Analyst, July/August 2005)

From the Inside Flap

When mechanical trading systems were first introduced into the arsenal of trading tools, the trader interested in utilizing these tools would have needed programming expertise, a strong background in mathematical technical analysis, and iron-willed discipline. Today, trading system software developed by market-data vendors has become so user-friendly, that nonprogrammers with only a rudimentary understanding of mathematical technical analysis can successfully create and backtest simple trading systems like those offered throughout this book.

In Mechanical Trading Systems, Richard Weissman uses his experiences as a trader and trading systems expert to take this concept to a new level. Filled with in-depth insight and practical advice, this book examines the development process for choosing and using mechanical trading techniques in conjunction with trader psychology. Mechanical Trading Systems skillfully explores the dangers in system development and how to avoid them; how backtesting and forward testing of trading systems aids in quantification of price risk; and the methods of improving rates of return on investments without significantly increasing risk. It also provides a detailed examination of the personality traits common to the three basic types of trader—trend-following (long to intermediate term), mean reversion (intermediate-term), and short-term (swing and day traders)—and illustrates how a strict adherence to specific types of trading systems can foster a psychological flexibility that will allow you to succeed in all kinds of trading environments: countertrending, choppy, or trending.

Some of the other issues discussed within these pages include:

* Why mathematical technical analysis is anideal building block in the development of mechanical trading systems
* How various flaws in trader psychology—fearfulness, impatience, greed, and lack of discipline—can be overcome
* The pros and cons of various traditional price risk management methods, such as stop loss and volumetric price risk management
* The psychological aspects of price risk management and how utilization of mechanical trading systems can aid in fostering confidence during drawdowns
* How your knowledge and experience can be utilized within the framework of a mechanical trading system

Mechanical Trading Systems offers a wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory. If you plan on improving your trading skills, this comprehensive resource can help you succeed.

From the Back Cover
Praise for MECHANICAL TRADING SYSTEMS

"Mr. Weissman's work is a metaphysical journey through the art of war. One need only read his preface to gain the true wisdom of market trading. What follows is a clearly marked guide to trading discipline and market mathematics . . . a stand out in a forest of technical works."
—Timothy Kelly, Founder and CEO, FOREX Television

"Mechanical Trading 101. The most complete, concise, and thorough analysis of every aspect of mechanical trading, from detailed case studies to enlightening reviews of psychological trading profiles. A real systematic approach to mechanical trading that will certainly improve your trading at any stage of your career."
—Frédéric Bettan, Business Development Manager, Institutional Clientele, Montréal Exchange

"A serious and sophisticated book for the advanced technical trader. Mr. Weissman emphasizes exactly the right aspect of designing and using a trading system——it has to match your character and personality to be of practical day-to-day use."
—Barbara Rockefeller, author of The Global Trader and Technical Analysis for Dummies

"A great contribution from a brilliant thought leader. . . . Mr. Weissman offers intriguing insight into trading by traveling across many disciplines in the process. His analysis of transformational psychology within the context of a mechanical trading system is a must-read for everyone involved in investment management. I am sure that institutional investors will benefit a great deal from his intuitive and innovative style."
—Kurtay Ogunc, PhD, MBA, CMFC, Managing Partner and CIO, Alpha Dynamics Group, LLC

"Mr. Weissman synthesizes a wealth of research and observations about human behavior and the use of mechanical trading systems in order to reprogram the trader. No other book so splendidly lays out the task of mental system creation, system construction, and system testing. The tools in this book go beyond system development in aiding to defuse erroneous human behavior in trading.I recommend this book to anyone who intends to trade utilizing systematic or discretionary programs in today's financial markets."
—Jesse M. Van Luvan, Managing Partner, Ambidex Fund and CEO, South Paw Strategic Investment, LLC
Customer Reviews

Good for the head and the heart5
I didn't grasp many of the technicalities pertaining to system trading (I don't trade or aspire to trade mechanical systems) but it is a wealth of generalized trading knowledge nonetheless. It is an inspiring book and a great confidence builder for me, confirming that I am on the right track regarding discipline and psychology and that, with persistence, success will come.

Psychology + Methods = a winning combination!5
The book is written in a clear, direct language - the author speaks to you, not at you. While leafing through a pile of trading books, I was stopped it in my tracks when I opened this volume. I got out my yellow highlighter and read attentively from cover to cover, taking notes. The author's unique approach was to combine traders' psychology with different types of trading; this book showed me something new about myself and other traders.

Weissman begins by explaining why "...natural and comfortable trading, using entry levels as reference points, ensures small profits and large losses. We need to reprogram ourselves to be comfortable with the unknowable and uncertain future. It helps to remind ourselves that the entry level is significant to us alone and that the sense of discomfort we feel as the market moves into previously unknown territory is entirely subjective and illusory."

Weissman outlines the three basic trader personality types: trend-following, mean-reversion [counter-trend], and day-trading. You need to be comfortable with yourself to trade well. You need the right system for your trading personality - and the author offers a rich menu for every type of trader. The author's practical, shrewd observations hold up a psychological mirror for traders. He points out that with trend-trading, just a few trades account for the bulk of profits, which means you cannot take time off from mechanical trend trading. Mean-reversion traders capitalize on temporarily unsustainable levels of euphoria or panic; they need an especially strong discipline not to overstay positions. Day-trading is labor-intensive, demands quick-mindedness and frequent vacations to avoid burnout.

The author shows how to test trend-following and mean-reversion (counter-trend) systems, as well as day-trading systems. He deals in depth with the benefits and pitfalls of system development and price risk management.

"Successful trading entails fighting natural inclinations toward comfort, security, impatience, perfection, fear, and greed. We can never control the markets, only how much risk we will assume in them." Weissman stresses the importance of keeping a trading journal. He confirms something that very few people appreciate - that at a very high end systematic and discretionary trading have a great deal in common.

Weissman's gentle but persistent insistence on both knowing yourself and stepping out of your comfort zone can have unusual results. In my case, it led me to develop a semi-mechanical system for day-trading e-minis!

Concise4
This is a well written concise book. Of course if you are looking for the 'holy grail' of trading you won't find it here...

That is for you to find and that idea pretty much sums up the true intention of this book.