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Trading Systems: A New Approach to System Development and Portfolio Optimisation
"The key is how to adapt existing codes to the current market conditions, how to build a portfolio and how to know when the moment has come to stop one system and start another one." Every day there are traders who make a fortune. It may seem that it seldom happens, but it does - as William Eckhardt, Ed Seykota, Jim Simons, and many others remind us. You can join them by using systems to manage your trading. This book explains exactly how you can build a winning trading system. It is an insight into what a trader should know and do in order to achieve success in the markets, and it will show you why you don't need to be a rocket scientist to build a winning trading system. There are three main parts to Trading Systems. Part One is a short, practical guide to trading systems' development and evaluation. It condenses the authors' years of experience into a number of practical tips. It also forms the theoretical basis for Part Two, in which readers will find a step-by-step development process for building a trading system, covering everything from initial code writing to walk forward analysis and money management. Part Three shows you how to combine a number of trading systems, for all the different markets, into an effective portfolio of systems. A trader can never really say he was successful, but only that he survived to trade another day; the "black swan" is always just around the corner. Trading Systems will help you find your way through the uncharted waters of systematic trading and show you what it takes to be among those that survive. A new approach to system development.
240 pages, Paperback
First published January 1, 2009
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259 people want to read
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Displaying 1 - 6 of 6 reviews
January 4, 2016
This book is a concise, descriptive and informative source for anyone choosing to develop a trading system.
The tangible value of this book is rather low: much of the information is material that you can find from reading other trader books or doing a web search on trading. The aggregation of the information and how one goes about testing their systems, making sure that they are thorough and when to walk away makes it a valuable resource for those who want to trade quantitatively. I found the explanations and examples of portfolio optimisation to be excellent starting points: I think the reason that most writers fail is that they do not manage to convey the iterative nature and complexity of setting up a trading system properly (its not rocket science, but it is not about picking the right horse either).
It is not pitched for a new trader, rather a new systems developer, from a trader who has an idea they would like to exploit. I liked the healthy dose of skepticism, caution and frank honesty in the writing: There are pitfalls, there are easy wins - here is an outline of how you can develop a good system, but we are not going to tell you what it is. The opaque nature of writing is reassuring - there are edges which you can develop by using the concepts. It doesn't waffle on about how successful you can be, and has sound focus on a technical background without being too mathematical. I consider it a canon read for my trading shelf and a worthy introduction into quantitative trading techniques.
The tangible value of this book is rather low: much of the information is material that you can find from reading other trader books or doing a web search on trading. The aggregation of the information and how one goes about testing their systems, making sure that they are thorough and when to walk away makes it a valuable resource for those who want to trade quantitatively. I found the explanations and examples of portfolio optimisation to be excellent starting points: I think the reason that most writers fail is that they do not manage to convey the iterative nature and complexity of setting up a trading system properly (its not rocket science, but it is not about picking the right horse either).
It is not pitched for a new trader, rather a new systems developer, from a trader who has an idea they would like to exploit. I liked the healthy dose of skepticism, caution and frank honesty in the writing: There are pitfalls, there are easy wins - here is an outline of how you can develop a good system, but we are not going to tell you what it is. The opaque nature of writing is reassuring - there are edges which you can develop by using the concepts. It doesn't waffle on about how successful you can be, and has sound focus on a technical background without being too mathematical. I consider it a canon read for my trading shelf and a worthy introduction into quantitative trading techniques.
July 14, 2021
This is a very good work by the authors. As a developer of trading systems with a lot of failures and some successes, I'm increasingly being aware of more and more pitfalls, still this book brought me some very interesting aproaches, which I'm not sure they are widely used.
Good points are the idea of looking for a stable area of parameters when optimizing, checking different timescales for that too.
The authors points to the development of some simple strategies that are time tested and that aren't very susceptible to deterioration on Out Of Sample tests. Also, they warn against the other side, when there is too much curve-fitting.
Walk-forward chapter could use a bit more info, like some minimum criteria for setting your timescale of WFO chunks, like number of trades or such.
On Part III, previous discussed trading systems are applied to a Portfolio level management. Authors advocate using equity line crossovers instead of a drawdown rule to drop strategies, but also shows other money/risk management systems.
Well written book for those algorithmic traders out there.
Estimated reading time: 5h30m.
Good points are the idea of looking for a stable area of parameters when optimizing, checking different timescales for that too.
The authors points to the development of some simple strategies that are time tested and that aren't very susceptible to deterioration on Out Of Sample tests. Also, they warn against the other side, when there is too much curve-fitting.
Walk-forward chapter could use a bit more info, like some minimum criteria for setting your timescale of WFO chunks, like number of trades or such.
On Part III, previous discussed trading systems are applied to a Portfolio level management. Authors advocate using equity line crossovers instead of a drawdown rule to drop strategies, but also shows other money/risk management systems.
Well written book for those algorithmic traders out there.
Estimated reading time: 5h30m.
April 26, 2021
Review is for 2nd Edition (2019).
April 16, 2025
This is a great book for learning both foundational and more advanced concepts and techniques in strategy and portfolio optimization. I particularly liked the emphasis on rather important topics like degrees of freedom and survivorship bias — acknowledging these and incorporating them to your portfolio development can help prevent costly mistakes down the road.
Although the authors warned against the risks of overfitting, their own strategy development at times appears to contradict this advice, adding additional filters and rules (with some of them later proving to be obsolete). If this was meant to serve as an example of what not to do, that intention wasn’t clearly communicated.
Although the authors warned against the risks of overfitting, their own strategy development at times appears to contradict this advice, adding additional filters and rules (with some of them later proving to be obsolete). If this was meant to serve as an example of what not to do, that intention wasn’t clearly communicated.
May 21, 2016
สอนการสร้างระบบเทรดสำหรับมือใหม่ เข้าใจได้ง่าย แต่แนวคิดในหนังสือไม่สามารถนำไปพัฒนาระบบเทรดที่ใช้งานจริงได้
มีบางประเด็นที่ misleading คนอ่านมือใหม่ อย่างเช่นเรื่อง polynomial curve fitting ไม่ควรถูกนำมาพูดถึงใน trading system เลยด้วยซ้ำ เพราะการคาดการณ์ราคาหุ้น มันแตกต่างจาก time series analysis รูปแบบอื่น คือ มันใช้แนวคิดของพวก regression มาใช้ไม่ได้
แต่โดยรวมถือว่าเป็นพื้นฐานการสร้างระบบเทรดที่ดีครับ โดยเฉพาะในตอนที่ 3 Systematic Portfolio Trading เป็นเรื่องของการสร้าง port และบริหารสัดส่วนของ port ซึ่งนักสร้างระบบเทรดส่วนใหญ่มักไปเน้นที่การหาสัญญาณซื้อและขาย แต่มองข้ามเรื่อง portfolio management ไป
มีบางประเด็นที่ misleading คนอ่านมือใหม่ อย่างเช่นเรื่อง polynomial curve fitting ไม่ควรถูกนำมาพูดถึงใน trading system เลยด้วยซ้ำ เพราะการคาดการณ์ราคาหุ้น มันแตกต่างจาก time series analysis รูปแบบอื่น คือ มันใช้แนวคิดของพวก regression มาใช้ไม่ได้
แต่โดยรวมถือว่าเป็นพื้นฐานการสร้างระบบเทรดที่ดีครับ โดยเฉพาะในตอนที่ 3 Systematic Portfolio Trading เป็นเรื่องของการสร้าง port และบริหารสัดส่วนของ port ซึ่งนักสร้างระบบเทรดส่วนใหญ่มักไปเน้นที่การหาสัญญาณซื้อและขาย แต่มองข้ามเรื่อง portfolio management ไป
November 11, 2016
From a pure beginner
I rather enjoyed the book. Easy to understand and approachable. I will say that I come to this book from a fairly strong scientific and mediocre stars background with minimal financial training. Thus I think I personally found the concepts intuitive if not overly simplistic.
Overall I, as a pure novice, found the book to be quite good and straight forward
I rather enjoyed the book. Easy to understand and approachable. I will say that I come to this book from a fairly strong scientific and mediocre stars background with minimal financial training. Thus I think I personally found the concepts intuitive if not overly simplistic.
Overall I, as a pure novice, found the book to be quite good and straight forward
Displaying 1 - 6 of 6 reviews