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A Guide to Creating A Successful Algorithmic Trading Strategy

Book Description

Turn insight into profit with guru guidance toward successful algorithmic trading

A Guide to Creating a Successful Algorithmic Trading Strategy provides the latest strategies from an industry guru to show you how to build your own system from the ground up. If you're looking to develop a successful career in algorithmic trading, this book has you covered from idea to execution as you learn to develop a trader's insight and turn it into profitable strategy. You'll discover your trading personality and use it as a jumping-off point to create the ideal algo system that works the way you work, so you can achieve your goals faster. Coverage includes learning to recognize opportunities and identify a sound premise, and detailed discussion on seasonal patterns, interest rate-based trends, volatility, weekly and monthly patterns, the 3-day cycle, and much more—with an emphasis on trading as the best teacher. By actually making trades, you concentrate your attention on the market, absorb the effects on your money, and quickly resolve problems that impact profits.

Algorithmic trading began as a "ridiculous" concept in the 1970s, then became an "unfair advantage" as it evolved into the lynchpin of a successful trading strategy. This book gives you the background you need to effectively reap the benefits of this important trading method.

  • Navigate confusing markets
  • Find the right trades and make them
  • Build a successful algo trading system
  • Turn insights into profitable strategies

Algorithmic trading strategies are everywhere, but they're not all equally valuable. It's far too easy to fall for something that worked brilliantly in the past, but with little hope of working in the future. A Guide to Creating a Successful Algorithmic Trading Strategy shows you how to choose the best, leave the rest, and make more money from your trades.

Table of Contents

  1. Acknowledgments
  2. Chapter 1: A Brief Introduction: The Ground Rules
    1. My Objective
    2. The Ground Rules
    3. The Process
    4. Basic Trading Systems
  3. Chapter 2: The Idea
    1. Begin at the Beginning
    2. The Idea Must Match Your Trading Personality
    3. I Need a Fast Payout
    4. Withstanding the Test of Time
  4. Chapter 3: Don’t Make It Complex
    1. A Word About Noise
    2. Integrated Solutions Versus Building Blocks
    3. More Rules, Fewer Opportunities, Less Success
  5. Chapter 4: Why Should I Care about “Robust” If I’m Trading Only Apple?
    1. Is It Robust?
    2. Another Dimension
    3. But Which Parameter Value Do I Trade?
    4. Multiple Time Frames
    5. Is One Trend Method Better Than Another?
  6. Chapter 5: Less Is More
    1. Volatility Cuts Both Ways
    2. Bull Markets Happen When Everyone Is in Denial
  7. Chapter 6: If You’re a Trend Follower, Don’t Use Profit-Taking or Stops
    1. The Dynamics of a Trend Strategy
    2. It’s Getting Harder to Find the Trend
    3. The Eurodollar Trend
    4. Where Do You Place Your Stop?
    5. What About Profit-Taking?
    6. Entering on a Pullback
    7. Which Is the Best Trend-Following Method?
  8. Chapter 7: Take Your Profit If You’re a Short-Term Trader
    1. What’s Bad for the Trend Is Good for the Short-Term Trader
    2. If You Can’t Use Stops for Trend Following, Can You Use Them for Short-Term Trading?
    3. There Are Always Exceptions
  9. Chapter 8: Searching for the Perfect System
    1. Looking at the Results
    2. How Much Data and How Many Trades Are Enough?
    3. So, Which Parameter Value Do I Pick?
  10. Chapter 9: Equal Opportunity Trading
    1. Calculating Position Size
    2. Avoid Low-Priced Stocks
    3. True Volatility-Adjusting Doesn’t Work for a Portfolio of Stocks
    4. Risk in Futures
    5. Target Risk
    6. Calculate the Rate of Return for the Portfolio
    7. Assigning Risk to Your Portfolio
    8. Multiple Strategies Are More Important
    9. Not So Easy for the Institutions
    10. Too Much of a Good Thing Can Be Bad
  11. Chapter 10: Testing—The Fork in the Road
    1. Let the Computer Solve It for You
    2. How Do You Evaluate the Results?
    3. What’s Feedback?
    4. Hidden Danger
    5. Forgotten History
    6. Use True Costs
    7. Use Dirty Data
    8. Back-Adjusted and Split-Adjusted Data
    9. The Different Performance Measures
    10. Interpreting the Ratio
    11. Not Everyone Uses the Information Ratio
    12. Number of Trades
    13. Expectations
  12. Chapter 11: Beating It into Submission
    1. Fixing Losing Periods
    2. Use the Average Results
    3. Squeezing the Life Out of a System
    4. Generalizing the Rules
  13. Chapter 12: More on Futures
    1. Leverage
    2. Conversion Factors for Calculating Returns
    3. Don’t Forget FX
    4. FX Quotes
    5. Real Diversification
    6. The Life Cycle of a Commodity Market
  14. Chapter 13: I Don’t Want No Stinkin’ Risk
    1. A Clear Plan
    2. Avoid Low-Priced Stocks
    3. Volatility Over 100%?
    4. Don’t Trade When Volatility Is Very High
    5. Sidestepping Price Shocks
    6. Portfolio Drawdown
    7. Business Risk
    8. Gearing Back Up
  15. Chapter 14: Picking the Best Stocks (and Futures Markets) for Your Portfolio
    1. Asking Too Much
    2. The Practical Solution
    3. Ranking Success
    4. Rotation
  16. Chapter 15: Matching the Strategy to the Market
    1. Noise for Stocks
    2. Noise for ETFs
    3. Noise for Futures
  17. Chapter 16: Constructing a Trend Strategy
    1. The Trend
    2. Buying and Selling Rules
    3. First Tests
    4. Costs
    5. Expectations
    6. Satisfying the First Milestone
    7. Profit-Taking
    8. Volatility Filter
    9. Combining Rules
    10. Multiple Entries and Exits
    11. More Markets, More Robustness
    12. Stabilizing the Risk
    13. Do It Yourself
  18. Chapter 17: Constructing an Intraday Trading Strategy
    1. The Time Frame
    2. Outline
    3. Deciding on the Strategy
    4. Choosing a Strategy
    5. Directional or Mean Reverting
    6. The Basic Rules
    7. The Breakout Rule
    8. Profit Taking and Extreme Volatility
    9. What About the Trend?
  19. Chapter 18: Summary
  20. Resources
    1. System Development Platforms
    2. Blogs
    3. Periodicals
    4. Perry Kaufman Websites
  21. Index
  22. EULA