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9780471415671

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

by
  • ISBN13:

    9780471415671

  • ISBN10:

    0471415677

  • Edition: 2nd
  • Format: Hardcover
  • Copyright: 2001-05-24
  • Publisher: Wiley

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Summary

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).

Author Biography

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).

Table of Contents

Preface xiii
Developing and Implementing Trading Systems
1(38)
Introduction
1(1)
What's New in This Edition
2(2)
The Usual Disclaimer
4(1)
What Is a Trading System?
4(1)
What Is a Trading Program?
4(1)
Classification of Return Generation Processes
5(3)
Comparison: Discretionary versus Mechanical System Trader
8(1)
Why Should You Use a Trading System?
9(1)
Robust Trading Systems: Tops Cola
10(1)
What Is a ``Good'' Trading Program?
11(1)
How Do You Implement a Trading System?
12(1)
Is Systematic Trading Easy?
12(2)
Who Wins? Who Loses?
14(1)
Appendix to Chapter 1: A Brief Technical Analysis Primer
15(24)
Introduction
15(1)
Assumptions of Technical Analysis
16(1)
Typical Price Patterns and Chart Formations
16(5)
Measured Objectives from Chart Formations
21(2)
Statistical Review
23(2)
Moving Averages
25(2)
Oscillators
27(1)
Price Channels and Bands
28(3)
Trendiness Indicators
31(1)
Dynamic Indicators
31(5)
Estimating Long-Term Support and Resistance
36(3)
Principles of Trading System Design
39(26)
Introduction
39(1)
What Are Your Trading Beliefs?
40(1)
Six Cardinal Rules
41(1)
Positive Expectation
42(2)
A Small Number of Rules
44(4)
Robust Trading Rules
48(7)
Trading Multiple Contracts
55(3)
Risk Control, Money Management, and Portfolio Design
58(4)
Fully Mechanical System
62(1)
Summary
63(2)
Foundations of System Design
65(54)
Introduction
65(1)
Diagnosing Market Trends
66(4)
To Follow the Trend or Not?
70(3)
To Optimized or Not to Optimize?
73(4)
Initial Stop: Solution or Problem?
77(7)
Does Your Design Control Risks?
84(4)
Data! Handle with Care!
88(2)
Choosing Orders for Entries and Exits
90(1)
Understanding Summary of Test Results
91(2)
What the Performance Summary Does Not Show
93(2)
Some Avoidable Pitfalls in System Testing
95(5)
A Reality Check
100(1)
Appendix to Chapter 3: Design Issues---Entry and Exit Strategies
101(18)
Design Issues for Entries
102(9)
Design Issues for Exits
111(6)
Summary: Review of Entry and Exit Strategies
117(2)
Developing New Trading Systems
119(82)
Introduction
119(1)
The Assumptions behind Trend-Following Systems
120(1)
The 65sma-3cc Trend-Following System
121(24)
Effect of Initial Money Management Stop
132(6)
Adding Filter to the 65sma-3cc System
138(6)
Adding Exit Rules to the 65sma-3cc System
144(1)
Channel Breakout-Pullback Pattern
145(10)
An ADX Burst Trend-Seeking System
155(5)
A Trend-Antitrend Trading System
160(6)
Gold-Bond Intermarket System
166(9)
A Pattern for Bottom-Fishing
175(8)
Identifying Extraordinary Opportunities
183(3)
Performance Update: 65sma-3cc System
186(2)
ATR-Band Breakout Model
188(1)
Trading Stocks
189(8)
Summary
197(2)
Appendix to Chapter 4: Additional Performance Updates
199(2)
Developing Trading System Variations
201(30)
Introduction
201(2)
Channel Breakout on Close with Trailing Stops
203(1)
Channel Breakout on Close with Volatility Exit
204(4)
Channel Breakout with 20-Tick Barrier
208(4)
Channel Breakout System with Inside Volatility Barrier
212(2)
Statistical Significance of Channel Breakout Variations
214(4)
Two ADX Variations
218(3)
The Pullback System
221(4)
The Long Bomb--A Pattern-Based System
225(4)
Summary
229(2)
Equity Curve Analysis
231(54)
Introduction
231(1)
Measuring the ``Smoothness'' of the Equity Curve
232(5)
Effect of Exits and Portfolio Strategies on Equity Curves
237(8)
Analysis of Monthly Equity Changes
245(6)
Effect of Filtering on the Equity Curve
251(5)
Modeling CTA Returns
256(3)
Stabilized Money Manager Rankings
259(5)
Mirror, Mirror on the Wall...
264(1)
Normalizing Returns
265(2)
Risk-Adjusted Measures of Performance
267(4)
Comparison of Risk-Adjusted Performance Measures
271(9)
Control Charts for Future Performance
280(3)
Summary
283(2)
Ideas for Money Management
285(58)
Introduction
285(1)
The Risk of Ruin
286(3)
Interaction: System Design and Money Management
289(6)
Projecting Drawdowns
295(3)
Changing Bet Size After Winning or Losing
298(3)
Depth of Drawdowns for Actual Performance Records
301(9)
Estimating the Duration of Drawdowns
310(4)
Estimating Future Returns
314(3)
Chande Comfort Zone
317(2)
Dealing with Drawdowns
319(3)
``Rescaling'' Volatility
322(2)
A Calibration for Leverage
324(1)
Return-Efficiency Benchmarks
324(3)
Empty Diversification
327(2)
Comparing Money Managers
329(8)
Risk and Reward in Stocks and Mutual Funds
337(2)
Summary
339(4)
Data Scrambling
343(12)
Introduction
343(1)
What You Really Want To Know about Your System
343(1)
Past Is Prolog: Sampling with Replacement
344(2)
Data Scrambling: All the Synthetic Data You'll Ever Need
346(6)
Testing a Volatility System on Synthetic Data
352(2)
Summary
354(1)
A System for Trading
355(20)
Introduction
355(1)
The Problem with Testing
356(1)
Paper Trading: Pros and Cons
356(1)
Do You Believe in Your System?
357(1)
Time Is Your Ally
358(1)
No Exceptions
358(1)
Full Traceability
359(1)
``Guaranteed'' Entry into Major Trends
360(1)
Starting Up
360(1)
Risk Control
361(1)
Do You Have a Plan?
361(1)
How Will You Monitor Compliance?
362(1)
Get It Off Your Chest!
362(1)
Focus on Your Trading
363(1)
Applications of Sports Psychology in Trading
363(6)
Trading with Your Head and Heart
369(1)
Summary
370(1)
Appendix to Chapter 9: Creating an Automated Diary of Trading Emotions
371(4)
Selected Bibliography 375(2)
Index 377

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The New copy of this book will include any supplemental materials advertised. Please check the title of the book to determine if it should include any access cards, study guides, lab manuals, CDs, etc.

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