Beyond Technical Analysis: How to Develop and Implement a Winning Trading System, 2nd Edition

Preface

The new edition reflects my intense experiences as a Commodity Trading Advisor (CTA), developing systems, trading over 60 futures markets around the world and marketing services to clients. The additions to the second edition spring from my research to find effective answers to clients’ questions about trading systems, risk control procedures, and expectations of future performance. For example, try giving a simple answer to the question, “What’s a ‘good’ benchmark for performance comparisons of CTAs, hedge funds, and stocks?” I developed tools for comparing managers, analyzing equity curves, quantifying risk-adjusted performance, estimating drawdown risk, and projecting expected returns. These tools have been tested and accepted by many large allocators in the managed futures business and can be applied to stock indexes and mutual funds. Hence, they should be useful to many investors and allocators.

As part of the 24/7/365 experiences of a CTA, I faced my share of difficult markets and learned unforgettable lessons about the applications of sports psychology to the trading environment. Research by psychologists into the state of “flow” is also useful to build a framework for analyzing trader’s reactions to the stresses of trading. This additional material in the second edition summarizes insights gained the expensive way. You can use it to cope with the inevitable stresses of trading.

In presentations to clients, there is rarely enough time to explain the nuances of design ...