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Mechanical trading systems - Weissman R.L.

Weissman R.L. Mechanical trading systems - Wiley publishing , 2005 . - 240 p.
ISBN 0-471-65435-3
Download (direct link): mechanicaltradingsystems2005.pdf
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6. Art Collins, “Making Money with Momentum,” Futures (August 2003): 45.
7. See Chapter 4 for stop-loss programming code. Also, whenever channel breakout is changed from the original stop and reverse system through the addition of other exit criteria, readers may want to consider unchecking the “allow entry on exit” box. Because the programming software cannot determine whether stops or entry orders were filled first on daily charts, unchecking this box lessens the severity of erroneous results in the backtested data.
8. Barbara Rockefeller, The Global Trader (New York: John Wiley & Sons, 2001), chapter 5.
Chapter 4
1. For more details, see Thomas Stridsman, Trading Systems That Work (New York: McGraw-Hill, 2001), pp. 70-77 and 157-159.
Chapter 6
1. The odds are also worse than 50 percent due to the fact that both buyers and sellers lose commissions and/or slippage.
Chapter 7
1. Robert Pardo, Design, Testing and Optimization of Trading Systems (New York: John Wiley & Sons, 1992), p. 55.
2. Ibid., pp. 86-89.
3. Ibid., pp. 88-89.
4. Jack D. Schwager, Schwager on Futures: Technical Analysis (New York: John Wiley & Sons, 1996), p. 674.
5. Pardo, Design, Testing and Optimization, p. 3.
6. Ibid., p. 4.
7. Schwager, Schwager on Futures, pp. 682-694.
8. Pardo, Design, Testing and Optimization, p. 134.
9. Ibid., p. 141.
10. Ibid., pp. 104-106.
11. Schwager, Schwager on Futures, pp. 688-691.
12. Pardo, Design, Testing and Optimization, pp. 143-144.
202
MECHANICAL TRADING SYSTEMS
13. Schwager, Schwager on Futures, pp. 626-629.
14. Pardo, Design, Testing and Optimization, pp. 78-79, 142.
15. Utilization of the most-up-to-date data for out-of-sample testing is merely the simplest solution to the walk-forward testing process. Other robust methodologies include random multiperiod data samplings.
16. Pardo, Design, Testing and Optimization, pp. 110-114.
17. Ibid., pp. 114-118.
18. Ibid., pp. 27-28.
19. Ibid., pp. 156-157.
20. Subtraction of the risk-free rate assumes the inability of traders to capture this rate of return while participating in the markets; this is not the case with exchange-traded futures.
21. For a more comprehensive examination of the topic, see Schwager, Schwager on Futures, chapter 21.
Chapter 8
1. Van K. Tharp, Trade Your Way to Financial Freedom (New York: McGraw-Hill, 1999).
2. Although it is sometimes argued that profits accumulated prior to the drawdown could act as a cushion to prevent the triggering of a system stop loss, this is not prudent price risk management. Instead, fund managers always must assume the infusion of investment capital subsequent to their fund’s attainment of a peak (or high water mark) in account equity. Based on this assumption, such an investor would not have the luxury of any previously accrued profits to cushion the drawdown in account equity.
3. Why 12 consecutive losses instead of 10? This is because as account equity decreases, the 4 percent being risked on each position becomes a smaller dollar amount. For example, on the second trade, we would be risking .04 times the remaining $96,000, or $3,840.
4. Thomas Stridsman, Trading Systems That Work (New York: McGraw-Hill, 2001), pp. 272-273.
5. For a comprehensive exposition of various methods of calculating value at risk, see Kevin Robert Dowd, Beyond Value at Risk (Chichester, UK: John Wiley & Sons, 1998), chapters 3-5.
6. Ibid., p. 12.
7. For a more comprehensive examination of stress testing, see ibid., chapter 6.
Chapter 9
1. Portions of this chapter were adapted from Richard Weissman. “Boosting Rates of Return with Non-Correlated Systems,” Technical Analysis of STOCKS &
Notes
203
COMMODITIES™, Vol. 22, No. 1 (January 2004). ©2004 Technical Analysis, Inc. Used with permission.
2. Joachim Goldberg and Rüdiger von Nitzsch, Behavioral Finance (Chichester, UK: John Wiley & Sons, 2001), pp. 102-106.
Chapter 10
1. See Neil Record, Currency Overlay (Chichester, UK: John Wiley & Sons, 2003),
p. 216.
2. For a detailed explanation of these tools, see Alexander Elder, Trading for a Living (New York: John Wiley & Sons, 1993), chapter 7.
Chapter 11
1. R. E. McMaster, The Art of the Trade (New York: McGraw-Hill, 1999), p. 118.
2. As opposed to the irrational belief that money is evil, McMaster defines money as “the stored evidence of the human spirit, energy, and accumulated life over time.” See ibid., p. 2.
References and Further Reading
Collins, Art. “Making Money with Momentum.” Futures (August 2003).
Cootner, Paul H., ed. The Random Character of Stock Market Prices. Cambridge, MA: MIT Press, 1964.
Crouhy, Michel, Dan Galai, and Robert Mark. Risk Management. New York: McGraw-Hill, 2001.
Dowd, Kevin. Beyond Value at Risk. Chichester, UK: John Wiley & Sons, 1998.
Elder, Alexander. Trading for a Living. New York: John Wiley & Sons, 1993.
Evans-Wentz, W.Y. Tibet’s Great Yogi Milarepa. London: Oxford University Press, 1928.
Fabozzi, Frank J., and Irving M. Pollack, eds. The Handbook of Fixed Income Securities, 6th ed. New York: McGraw-Hill, 2000.
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