Trading Systems and Methods

Author: Perry J. Kaufman
List Price: $95.00
Our Price: Click to see the latest and low price
ISBN: 0471148792
Publisher: John Wiley & Sons (16 November, 1998)
Sales Rank: 11,541
Average Customer Rating: 4.4 out of 5

Customer Reviews

Rating: 4 out of 5
A Complete Insight Into Trading Systems and Methods
Perry Kaufman offers a thorough and informative encyclopedia of trading systems and insights in a comprehensive guide of nearly 700 pages. The book is geared for a more advanced level of trader, as well as for someone interested in focusing on the mathematical foundations of building and testing trading systems. If you are looking for a detailed and mathematically-oriented approach to futures trading systems, then this highly quantitative book is for you.

The goal of Kaufman's book is "to give a you a complete understanding of the tools and techniques needed to develop or choose a trading program that has a good chance of being successful." He excludes commentary on market psychology and execution or trading skills in favor of focusing primarily on the development of a well-thought-out and tested system.

Kaufman has worked extensively in price forecasting, and he is a well-known technical expert in futures markets. He is a principal of an international investment firm and has written extensively on trading systems. Since he has an extensive background in futures trading and research, the futures markets remain the primary focus of the book. Any trader interested primarily in equity trading might find this book more advanced than necessary.

For anyone even remotely interested in learning about the complexities of trading systems, then this book does offer some interesting insights into how in depth some trading systems can become. For instance, the book explains techniques like trend and countertrend analysis, indicators, and various testing methods. Also covered are choice of data, diversification, time frames, trade selection, choosing a method of analysis, and testing.

As for the ongoing learning process that trading demands, I particularly liked the quote Kaufman uses at the beginning of the book. He quotes JRL as saying that "If you have a minute, I'll tell you how to make money in stocks. Buy low and sell high--Now if you have five or ten years, I'll tell you how to tell when stocks are low and high." Learning takes a lot of time, and if you have the time Kaufman's book is worth reading.


Rating: 4 out of 5
One of the better books in the WTA series.
This is not so much an encyclopedia as it is a fairly complete compendium of various trading tools and strategies. Almost all such research focuses on the futures markets; the closest these get to the stock market is the S&P 500 index. This is true of technical analysis in general, so if you're interested in the stock market you will generally have to extrapolate.

Kaufman is a pretty able and knowledgeable reporter on the research results of others, but I have to say that in places the transcriptions are confusing, unclear and ambiguous. Even though the book is nearly 700 pages long, some of the coverage is too sparse -- while in other areas it seems too wordy. This 3rd edition could benefit from a start-to-finish re-organization/re-write, as some ideas are explained multiple times in various places and other ideas which are introduced early and deemed important are then ignored throughout the rest of the book. I'm thinking primarily of the basics of statistics and tests for significance; much of what might work at times is superfluous. My impression is that while Kaufman is very experienced in the markets and with trading systems in general, that he's a dilettante so far as really rigorous mathematics is concerned. Pick and choose among the many clever ideas here carefully. 3 1/2 stars.


Rating: 1 out of 5
Be aware
Don't get me wrong, the author doesn't seem stupid - he developed his own adaptive trend following method. But he has completely no idea how the market works and what can possibly work in the market. This book is a compilation of many technical trading methods, but most of them are stale and some ridiculously insane. Page 376-377 he has a chart and program to compute the moon's phase, because we should buy at full moon and sell at new moon? The selling point of the book is it contains some source code, but most of them are naive. Page 640 betrayed that the author only wrote the programs over twenty years ago when there was no graphics output. In regression he had to use many "*"s to draw the line. And why would any reader need the Fortran source code in the appendix to do regression? Remind you that those ten pages would cost you a buck.

In short, the book has no value for professionals. For individual investors, be aware - the book could actually be harmful because it gives you false confidence. In the investment world half bottle may be worse than you know you have nothing in the bottle.

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