2006 Dec 26 - Tue

Book: New Trading Systems and Methods, by Perry J. Kaufman

Many people refer to the Achelis book for simple, straight-forward descriptions of technical analysis tools. I too have it on my primary bookshelf. However, lately, more often than not, I find myself reaching for Kaufman's book to get good background on the various ways of technically analysing trading options. Kaufman has chapters devoted to practically every indicator type you may encounter: chart reading, events, regressions, trending, momentum, oscillators, seasonality, cycles, patterns, multiple time frames, and advanced techniques. He then goes into some details regarding system testing, practical considerations, risk control, and diversification. As a wrap up, he provides some end-notes for the mathematically inclined.

There appear to be traders who will sit at their screen all day and watch for pattern based setups. It appears that many traders fall into this category, and the book is not for them.

Notes and blogs regarding people who do automated trading appear to be few and far between. In any case, this book is for the analytical crowd who need to prepare for the day's manual trades. It is also for the automated crowd who need the computer to do all the trading 'by-the-rules' in order to eliminate all forms of emotion from the trade.

I think you'll find a wealth of ideas you can mix and match to make a trading strategy uniquely your own.

Technical anlysis and automated trading strategy design takes much work and energy. A good chunk of statistics is practically mandatory (which the book does provide in various sections). This book fulfills only a portion of the overall knowledge someone will need build a winning trading strategy. Trader phsychology and money management skills will need to be learned elsewhere.

I'll give the book two thumbs up as it provides excellent details on the spectrum of technical analysis and provides references for the times you wish to flesh out the details. Mr. Kaufman must have a most amazing technical library, based upon the breadth and depth of descriptions, references, and citations he uses.

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