Trading Systems and Methods, + Website

Variables 252Transforming Nonlinear to Linear 256Evaluation of Two-Variable Techniques 257Multivariate Approximations 259ARIMA 267Basic Trading Signals Using a Linear Regression Model 273Measuring Market Strength 276CHAPTER 7 Time-Based Trend Calculations 279Forecasting and Following 279Price Change over Time 284The Moving Average 284Geometric Moving Average 292Accumulative Average 293Reset Accumulative Average 293Drop-Off Effect 293Exponential Smoothing 293Plotting Lags and Leads 307CHAPTER 8 Trend Systems 309Why Trend Systems Work 309Basic Buy and Sell Signals 314Bands and Channels 320Applications of a Single Trend 330Comparison of Major Trend Systems 336Techniques Using Two Trendlines 350Multiple Trends and Common Sense 356Comprehensive Studies 359Selecting the Right Trend Method and Speed 359Moving Average Sequences: Signal Progression 363Early Exits from a Trend 366Moving Average Projected Crossovers 366CHAPTER 9 Momentum and Oscillators 369Momentum 370Divergence Index 384Oscillators 385Double-Smoothed Momentum 404Velocity and Acceleration 412Hybrid Momentum Techniques 416Momentum Divergence 418Some Final Comments on Momentum 426CHAPTER 10 Seasonality and Calendar Patterns 427A Consistent Factor 428The Seasonal Pattern 429Popular Methods for Calculating Seasonality 430Seasonal Filters 456Seasonality and the Stock Market 478Common Sense and Seasonality 483CHAPTER 11 Cycle Analysis 485Cycle Basics 485Uncovering the Cycle 494Maximum Entropy 514Cycle Channel Index 520Short Cycle Indicator 521Phasing 523CHAPTER 12 Volume, Open Interest, and Breadth 527A Special Case for Futures Volume 527Variations from the Normal Patterns 529Standard Interpretation 531Volume Indicators 535Breadth Indicators 546Interpreting Volume and Breadth Systematically 554An Integrated Probability Model 558Intraday Volume Patterns 559Filtering Low Volume 562Market Facilitation Index 564CHAPTER 13 Spreads and Arbitrage 565Dynamics of Futures Intramarket Spreads 566Carrying Charges 567Spreads in Stocks 569Spread and Arbitrage Relationships 570Risk Reduction in Spreads 571Arbitrage 572The Carry Trade 596Changing Spread Relationships 600Intermarket Spreads 602CHAPTER 14 Behavioral Techniques 617Measuring the News 618Event Trading 623Commitment of Traders Report 635Opinion and Contrary Opinion 641Fibonacci and Human Behavior 648Elliott's Wave Principle 651Price Target Constructions Using the Fibonacci Ratio 660Fischer's Golden Section Compass System 662W. D. Gann--Time and Space 666Financial Astrology 671CHAPTER 15 Pattern Recognition 685Projecting Daily Highs and Lows 687Time of Day 689Opening Gaps 699Weekday, Weekend, and Reversal Patterns 711Computer-Based Pattern Recognition 732Artificial Intelligence Methods 735CHAPTER 16 Day Trading 737Impact of Transaction Costs 738Key Elements of Day Trading 744Trading Using Price Patterns 753Intraday Breakout Systems 759Intraday Volume Patterns 774Intraday Price Shocks 775CHAPTER 17 Adaptive Techniques 779Adaptive Trend Calculations 779Adaptive Variations 788Other Adaptive Momentum Calculations 793Adaptive Intraday Breakout System 796An Adaptive Process 797Considering Adaptive Methods 798CHAPTER 18 Price Distribution Systems 801Measuring Distribution 801Use of Price Distributions and Patterns to Anticipate Moves 805Distribution of Prices 811Steidlmayer's Market Profile 822Using Daily Distributions to Identify Support and Resistance 830CHAPTER 19 Multiple Time Frames 833Tuning Two Time Frames to Work Together 833Elder's Triple-Screen Trading System 835Robert Krausz's Multiple Time Frames 838Martin Pring's KST System 842CHAPTER 20 Advanced Techniques 845Measuring Volatility 845Using Volatility for Trading 856Trade Selection Using Volatility 861Liquidity 867Trends and Price Noise 868Trends and Interest Rate Carry 871Expert Systems 871Fuzzy Logic 875Fractals, Chaos, and Entropy 880Neural Networks 886Genetic Algorithms 895Replication of Hedge Funds 902CHAPTER 21 System Testing 905Expectations 907Identifying the Parameters 908Selecting the Test Data 910Testing Integrity 916Searching for the Best Result 919Visualizing and Interpreting Test Results 922Large-Scale Testing 932Refining the Strategy Rules 937Arriving at Valid Test Results 938Comparing the Results of Two Systems 946Profiting from the Worst Results 950Retesting for Changing Parameters 951Testing across a Wide Range of Markets 954Price Shocks 970Anatomy of an Optimization 972Summarizing Robustness 976CHAPTER 22 Practical Considerations 983Use and Abuse of the Computer 984Extreme Events 992Gambling Techniques--The Theory of Runs 1000Selective Trading 1011System Trade-Offs 1012Trading Limits and Disconnected Markets 1018Silver and NASDAQ--Too Good to Be True 1020Similarity of Systematic Trading Signals 1021CHAPTER 23 Risk Control 1027Mistaking Luck for Skill 1027Risk Aversion 1028Liquidity 1033Measuring Return and Risk 1034Leverage 1046Leverage Based on Exposure 1049Individual Trade Risk 1050Kaufman on Stops and Profit-Taking 1059Ranking of Markets for Selection 1062Probability of Success and Ruin 1072Entering a Position 1076Compounding a Position 1080Equity Trends 1085Investing and Reinvesting: Optimal f 1088Comparing Expected and Actual Results 1092CHAPTER 24 Diversification and Portfolio Allocation 1099Diversification 1100Changing Correlations 1105Types of Portfolio Models 1105Classic Portfolio Allocation Calculations 1107Finding Optimal Portfolio Allocation Using Excel's Solver 1109Kaufman's Genetic Algorithm Solution to Portfolio Allocation (GASP) 1114Volatility Stabilization 1142APPENDIX 1 Statistical Tables 1147APPENDIX 2 Matrix Solution to Linear Equations and Markov Chains 1151APPENDIX 3 Trigonometric Regression for Finding Cycles 1161Bibliography 1175About the Companion Website 1191Index 1193