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Summary: Great system trading book
Review: Great book if you are interested in writing system code. Good backgound about ideas that may work and those that do not. The most valuable part of the book is the companion CD that is availabe. The software on the CD allows for testing of portfolio systems (something not really possible with most retail charting/trading software). Source code is fully revealed allowing for as much customization as one would like.
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Summary: Real value!
Review: I was new to the topic of automated trading systems when I purchased this book. If it is your case, I can tell you that this is the place you want to start. why? Because it will teach you the truth about system development and give you a scientific perspective on the topic. No promises, no blabla you will be rich in 2 weeks. You will realize that there is a lot of work to do to get there, and the book will help you enter this great subject with smooth.
In short: no promises, only scientific realities on how to take out profits from the markets.
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Summary: Why wasn't there a book like this when I started trading?
Review: I would have saved countless hours if I had a book like this when I started developing trading systems with Omega Research TradeStation. It covers the basics: like you can't assume all stock data is good data. Then progresses into advanced and very advanced topics not found anywhere else besides inside the big institutions. It also goes into great detail on evaluating the performance of your simulations. A great read for the novice and the advanced trader.
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Summary: How did I trade without it!
Review: I've waited a long time for a book like this; a clear, concise, intelligent approach to the study of the markets. In addition, the companion software was a real bargain. I highly recommend it to any serious system trader. I've been a fan of their articles in Stocks & Commodities for years. This book exhibits the same rigor and attention to detail I have appreciated in their articles. I look forward to their new book on day trading.
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Summary: An Invaluable Road Map
Review: Katz and McCormick continue to add to their already impressive contributions in the field of Trading Strategies with this exhaustive piece of work. It presents an entire foundation on the subject that will be keenly absorbed by both neophyte and aficionado alike. Their findings are are most enlightening and will help any "systems trader" focus or refocus their research. Doesn't require a Ph.D. in Mathematics (ala Kauffman) and their use of C++ overcomes the significant limitations of other authors almost slavish devotion to Tradestation. The single most important book on this subject that I have read. Buy it!
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Summary: Indispensable Reference - Truly Encyclopedic in Scope
Review: Katz and McCormick's book represents a monumental effort in compiling, reviewing, and statistically analyzing a broad array of trading approaches. Unlike many of today's technical analysis books, this one provides truly useful information for meaningful system development, testing, and effective implementation. It represents one of the best values available for the breadth of insightful information it provides. The book starts with coverage of a broad spectrum of basic topics including data, trading simulators, optimizers, statistics, indicators, and system design. What makes this work unique is the discussion and analysis of each trading strategy by: category, definition, theory, analytical testing, and summarization of results with emphasis on the current effectiveness of the strategy. The book addresses issues of concern to novice, intermediate, and advanced traders. I feel that this will become a trading classic.
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Summary: Indispensable for automated trading system builders!
Review: Most books on trading assume either that the reader never got to college, or else that they never left. This one, however, is different, rapidly bringing the technical but non-specialist reader up to speed in the principled construction of automated trading engines.If you have a reasonably numerate background, perhaps with some software development experience, and have found yourself drawn to the concept of constructing your own mechanical trading system, you owe it to yourself to read this text. Quite simply, it is superb. The authors begin by describing the core components of a sound system, including the application of statistical inference and the selection of appropriate sample sets for back-testing. They then go on to provide a set of normalised comparisons of various trading 'rules' for entry and exit (e.g., breakouts, MAVs, oscillators, neural net predictors, etc.) together with discussion of optimisation systems (such as simulated annealing and genetic refinement). The actual results of some 'respectable' rulesets you may find rather shocking! And if you are only dimly aware of what genetic algorithms can offer the modern trader, you should buy this book for that reason alone. The style of the text is clear and unstuffy, with chapters of readable length and well-structured content. The reader who wants to learn more will find this book an ideal jumping off point, since many references to the literature are provided, but an excessive technical background is not assumed, and the work is for the most part self-contained. The only minor issues are 1) the title is a somewhat misleading; you will not find an A-Z list of trading strategies here, but rather a more select discussion of the techniques (and the validity of certain *classes* of strategy) involved in building viable automated trading systems; and 2) there is some ugleeee typesetting of mathematical formulae in Fortran (!). However, neither points really count for more than nitpicking in contrast to the value of the text overall. In summary, there is real content here - described and justified, if you are an engineer like me, through the sort of scientific analysis and rigour that creates more excitement than a million words of hype. Fed up with TradeStation? Writing your own system in C++? In need of a bit of inspiration and guidance? If this sounds familiar, you want this book, believe me. IMHO, it's a classic. Buy it.
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Summary: Rigorous, Scientific Tests. Superb.
Review: Most Trading books: unsubstantiated assertions with little or no testing that is poorly done. This book: precise, thourough testing with clearly disclosed quantitative methodology. An assortment of the most popular classical and modern methods are tested using a normalized, broad spectrum portfolio test. This allows an apples-to-apples comparison of the methods (with some surprising and sobering results!). The authors then identify which methods best capture the inefficiencies of each particular market. All methodolgies and software are fully, clearly, and thouroughly disclosed. I have only three minor quibbles. First, the type-setting of equations in computer code(probably to save printing costs). Second, the "Encyclopedia" moniker is a bit misleading in that many popular methods are not covered (admittedly,a nearly impossible task to cover all methods). Third, the writting style is a bit wordy with little white-space. None of these minor complaints, however, come close to warranting a reduction in the five star rating. I haven't read any trading info of similar stature in years (and believe me, I've read a lot!). Highly recommended.
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Summary: Interesting trading models and exit strategies
Review: Mostly testing of trading models in C or C++. then testing of exit strategies. Well organized and easy to read, interesting even if you are not interested in optimizing.
Too much talk about slippage which he should point out that this is a problem for day traders that could be solved by automated trading platform and its not for everybody to worry about that much. Then talks also about gunning, as the name implies.
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Summary: Good principles, good start for programming systems
Review: The authors cover the ground of "Build a Trading Program" quite effectively. They have presented results using systems built around traditional technical indicators and their own "standard exit" method. These they use to show how to evaluate systems. This brief summary understates considerably the material presented on entries. Differing entry techniques (limit, stop & market)are examined in the context of each "system." The reader is thus exposed to both the methodology of statistical evaluation and to "how it feels" to use this technique or that. The authors actually start the book with an introduction to data types, availability and time frame; the bare-bones of needed statistical material; simulators (programs to simulate trading); and, optimizers and optimizing. I scanned the material, due to my own familiarity with it. It seems like good background. One point I've not seen elsewhere is the suggestion to optimize for high Student-t scores, an excellent idea. Exits and exit techniques are dealt with, although less voluminously than entry techniques. One reason for that is the difference in amount written on the two. Everyone who wants to sell you a system, be it a book or a seminar, will emphasize entry technique. Very little has been written on exits, which are a more difficult sell. Katz & McCormick have presented the basic categories of exits. While "basic categories" doesn't sound like much, it is more than I can recall appearing elsewhere in print. These categories are the building blocks for the second most important part of a system: exits. (More important is money management.) Here, as throughout the book, C+ code is included, allowing one to implement one's own approaches. Another section, also with code, is use of genetic algorithms in system design. This is one of the best sections on GA's in trading that I've seen. It is not exhaustive (thank heavens) but will get you started without forcing a reading of Goldberg's text on GA's. Another departure from the norm is a short presentation of using GA's to optimize for the elements of the system, not for the actual output, a superior idea. As the authors point out, exits are far more important than entry. A test system I wrote recently entered almost randomly after it had determined volatility was sufficiently high. Although not sophisticated, the exits were other than random. Although less than 20% accurate, it produced very substantial profits. Actual implementation is a bit trickier; real markets don't always provide the smooth entry and exit of systems testing. Be that as it may, the essential point remains: exit and money management are where the profits are. Entries are for seminar junkies and would be traders. If trading is what you want to do, and computer-driven systems are what you will use, this is a book that you should read. It is the best I've seen (and I've seen a few). The other pieces to the trading puzzle are psychology (Ruth Roosevelt) and money management (Ralph Vince - not perfect, but a necessary read).
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