Mechanical trading systemsAuthor: Weissman R.L.
Publishers: Wiley publishing
Year of publication: 2005
Number of pages: 240
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Pairing Trader Psychology with Technical Analysis
RICHARD L. WEISSMAN
John Wiley & Sons, Inc.
Copyright Â© 2005 by Richard L. Weissman. All rights reserved.
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Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada
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For my wife, Pamela Nations-Weissman, whose vision inspired this manuscript, and also for my parents, whose belief and support guided me through the early years
Every battle is won before it is ever fought.
CHAPTER 1 Dispelling Myths and Defining Terms: Mathematical Technical Analysis and Mechanical Trading Systems 1
Dispelling the Myths: The Inefficient Market and the
Hard Road to Profits 1
Technical Analysis: A Definition 3
Mechanical Trading Systems: A Definition 5
Defining the Time frames 6
Technical Analysis: Why it Works 6
Types of Technical Indicators: Trend-Following and Mean
CHAPTER 2 Mathematical Technical Analysis: A Building Block for Mechanical Trading System Development 15
Types of Technical Indicators 16
Trend-Following Indicators: Indicator-Driven Triggers 18
Price-Triggered Trend-Following Indicators: Donchianâ€™s
Channel Breakout 30
Mean Reversion Indicator-Driven Triggers: Oscillators 31
MECHANICAL TRADING SYSTEMS
CHAPTER 3 Trend-Following Systems: A Matter
of Fortitude 41
Preliminary Considerations 42
Two Moving Average Crossover 50
Ichimoku Two Moving Average Crossover 52
Three Moving Average Crossover 53
Ichimoku Three Moving Average Crossover 54
DMI with ADX 57
Channel Breakout 59
Bollinger Bands 60
Some Comparisons 61
General Rules of Thumb 63
Cutting the Tails of a Systemâ€™s Distribution 65
Psychological Profile of a Trend-Following Trader 69
CHAPTER 4 Mean Reversion Systems:
A Matter of Patience 73
Considerations in Analyzing Intermediate-Term Mean
Reversion Trading Systems 73
Trend-Following Mean Reversion Systems 74
Nondirectionally Biased Mean Reversion Systems 81
Psychological Profile of an Intermediate-Term Mean Reversion Trader 85