Foundations of Trading
The trader’s universal goal.
To have confidence that the signals generated by the trading system precede trades that provide rewards adequate to compensate for the risk.
Developing profitable systems is difficult for several reasons:
- Financial markets are very efficient.
- The profitable patterns are a weak signal in a noisy background.
- Competition is stiff.
This book presents an approach to developing profitable trading systems using scientific techniques, melding together several key aspects:
- Personal risk tolerance.
- Profit potential of the financial issue being traded.
- Data analysis.
- Adjusting the model to fit the data.
- Validation to estimate future performance.
- Comparing alternative use of funds.
- Determining whether the system is broken.
- Computing proper position size to maximize account growth while holding drawdown within the trader’s tolerance.
Dr. Howard Bandy is uniquely qualified.
- His education includes university degrees in mathematics, physics, engineering, and computer science.
- He was a professor of mathematics and computer science, and a university dean.
- He began studying artificial intelligence, modeling, and simulation while in graduate school, and continued applications throughout his career.
- He was a senior research analyst for a commodity trading advisor.
- He is the author of six books related to trading system development, with over 110,000 copies in circulation.
These links each open a pdf file related to the book.
- Table of Contents
- Introduction (Chapter 1 — First Pages)
- Risk (Chapter 2 — First Pages
- Development (Chapter 3 — First Pages)
- Summary (Chapter 4)
- Fundamental Analysis (Appendix A)
- Data Sources (Appendix B)
- Development Platforms (Appendix C)
- Bibliography (Appendix D)