Beyond Technical Analysis: How to Develop and Implement a Winning Trading System

by Tushar S. Chande

Overview

A technical analysis classic, newly updated to help traders develop and forward-test a high-performance trading system for today's markets
In trading, a winning system is everything. While it is theoretically possible to buy a "canned" trading system, most experts agree that the best system is proprietary to each trader—developed, implemented, and tested by the individual to suit his or her exact requirements. A stimulating mix of cutting-edge techniques, timeless principles, and practical guidelines, this updated edition of a technical analysis classic offers traders a comprehensive methodology to develop and implement your own trading system, bridging the gap between analysis and execution.
Tushar Chande (Pittsburgh, PA) holds nine U.S. patents for creative solutions to flexible manufacturing problems using high-power lasers and optical fibers. A contributing editor to Technical Analysis of Stocks & Commodities magazine, he has been a registered Commodity Trading Advisor and is the principal author of The New Technical Trader (0-471-59780-5) (Wiley).

Product Details

ISBN-13:	9780471415671
Publisher:	Wiley
Publication date:	05/24/2001
Series:	Wiley Trading , #101
Edition description:	REV
Pages:	400
Product dimensions:	6.20(w) x 9.43(h) x 1.19(d)

About the Author

TUSHAR S. CHANDE, PhD, is President of LongView Capital Management, LLC, of West Des Moines, Iowa, and a registered Commodity Trading Advisor. He holds nine U.S. patents and is internationally recognized as an innovator in technical analysis. He is also the principal author of The New Technical Trader (Wiley).

Read an Excerpt

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 too s 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 a so 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 tradeoffs. Hence, marketing necessities led to the development of simplified schemes for classifying entry and exit strategies and system designs to explain the strengths of trading strategies. These classification schemes may be useful to you in your own iterations.

The new edition allowed me to give a true out-of-sample performance update for systems discussed in the first edition, and to show how to trade futures as we as stocks with the same system. This edition a so includes an illustration of how CTAs derive their returns, and how to develop stabilized money-manager rankings. A review section of the basics of technical analysis is included at the request of many readers.

Since the publication of the first edition, I have had the good fortune to meet some of the most successful traders in the futures business, with individual net worths of $50 million to $100 million, and even beyond. They had reached the top of the mountain, and I tried to understand what got them there. I have summarized these impressions graphically in the form of the trader's mountain in the first section of the new edition. I am happy to report that the top traders agreed with the ideas in the first edition, and used many of them in one form or another. The discussions with top traders and the experiences of trading millions of dollars have convinced me that this book is useful in the "real world". I hope most readers will agree that the expanded scope of the new edition fulfills the original purpose of providing practical guidance for developing and implementing winning trading systems.

Table of Contents

Preface.

Developing and Implementing Trading Systems.

Principles of Trading System Design.

Foundations of System Design.

Developing New Trading Systems.

Developing Trading System Variations.

Equity Curve Analysis.

Ideas for Money Management.

Data Scrambling.

A System for Trading.

Selected Bibliography.

Index.

Editorial Reviews

Chande (a commodity trading advisor) outlines the process of building a trading system customized to individual beliefs and aims. He describes the techniques, principles, and guidelines that go into a system which balances risk and reward. Chapters cover the development and implementation of a trading system, principles of its design, its foundation, the development of new systems, variations on the system, equity curve analysis, money management, and data scrambling. Annotation c. Book News, Inc., Portland, OR (booknews.com)

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