Book Title : Trading Systems: A new approach to system development and portfolio optimisation

Author : Urban Jaekle & Emilio Tomasini

Review Date : April 2011


Buy Now From The
Systems For Traders
BookShop


About the Authors

Urban Jaekle holds a diploma in Physics. He is a regular speaker at the main European trading events and contributes to Traders and Active Trader magazine. His main business is to provide trading systems advisory services for hedge funds and institutional investors – mainly with automated trading systems, portfolio optimisation and money management solutions.

Emilio Tomasini is a proprietary trader for many European Banks and hedge funds and Adjunct Professor of Corporate Finance at the University of Bologna. Italy.

On The Back Cover

Every day the sun rises on the horizon there are some traders who make a fortune. It may seem that it seldom happens but it does - as William Eckhardt, Ed Seykota, Jim Simons, and many others remind us. And you can join them by using systems to manage your trading.

This book explains exactly how you can build a winning trading system. It is an insight into what a trader should know and do in order to achieve success in the markets, and it will show you why you don’t need to be a rocket scientist to build a winning trading system.

There are three main parts to Trading Systems. Part one is a short practical guide to trading systems' development and evaluation. It condenses the authors years of experience into a number of practical tips. It also forms the theoretical basis for part two in which readers will find a step-by-step development process for building a trading system, covering everything from initial code writing to walk forward analysis and money management. Part Three shows you how to combine a number of trading systems, for all the different markets into an effective portfolio of systems.

A trader can never really say he was successful but only that he survived to trade another day: the black swan is always just around the corner. "Trading Systems" will help you find your way through the unchartered waters of systematic trading and show you what it takes to be among those that survive.

BookWorms View

This book is one of my most recent acquisitions and was on my shopping list for a few months before I took the plunge. My interest stemmed from the work I have been doing in the past 6 months on developing my own trading systems. Again there is a wealth of information on the Internet relating to trading system development and much of my guidance was previously gleaned in such a manner.

The more I delved into the art of system development the more interested I became in the process. I wanted more information than I could find by scanning the various Internet forums. There is not a lot of printed literature available on the subject and as technologies move so quickly I decided to purchase one of the most recent titles covering this subject.

In Part 1 of the book, chapter one contains a very good discussion regarding what a trading system consists of. This is followed in the second chapter with a detailed discussion on the design, test, optimisation and evaluation of trading systems. There is some seriously interesting information in this second chapter covering system optimisation. I had already encountered elsewhere some of the problems associated with system back-testing i.e. that although systems are optimised for past data – this often fails to guarantee that systems will continue to function well into the future. This may have been encountered by anyone who has ever purchased an “off the shelf” system. Although the historic equity curve looks particularly attractive, very often it does not perform as well going forward after you start using the system. This section of the book contains an extensive discussion on this topic and a number of techniques that I had not previously encountered that attempt to future proof the use of the system. These techniques will be within the skill range of any moderately experienced trader. One has to wonder how many current trading systems that are for sale have been as rigorously evaluated using the techniques outlined in this book. For anyone who has a passing interest in systemised trading this information will be invaluable. After reading this one may have second thoughts about purchasing any system that has not had this treatment. If anyone is also considering marketing their own system – then a good start would be reading this book.

Part 2 of the book “Trading system development and evaluation of a real case” outlines how the authors started from scratch to develop a system and evaluated it using the techniques outlined in the book. One of the benefits of this is that the reader has a ready-made system to trade and I intend in the future to include this system in my trading portfolio. The method and results of the evaluation will give the reader far more confidence to use this system than many other systems currently on the market.

Another notable discussion concentrates on how to evaluate a systems predictive nature. This contains an excellent discussion of Monte Carlo Analysis and Gaussian Distributions that is easily understandable by any non-statistician.

Part 3 of the book covers the more advanced aspects of how to develop a portfolio approach to system trading and the issues surrounding correlation between systems. Some of the software used to assess these correlations may be beyond the scope of the individual trader.

The final part of the book is a useful set of Appendices that outline three different systems and various ideas for how to use them in your trading.

Because of my interest in trading systems development I found this book a thoroughly interesting read that contains a wealth of information and quite a few new revelations for me. I would go so far as to say that for anyone who is using a systemic approach to their trading that they will find something of use to them in this book. It is half the price of many trading systems on the market and also contains three tested systems virtually ready to go. The authors have been employed by large hedge funds to advise and assist on systemised trading strategies and the contents give a good insight into how the professionals approach the issues associated with trading system development and use.

I always try to find a powerful quote from the books I read and the following from the books preface is also touched upon on the back cover:-

“We remind readers and also ourselves, that a trader can never say he achieved success but only that he survived: the black swan is always around the corner.

Please always keep in mind what the acclaimed systems’ developer Thomas Stridsman writes:

‘It is only a question of how long you stick around. If we all stick around long enough the probabilities have it that we all will be wiped out sooner or later. It is just a matter of time’

No piece of advice could be more appropriate for our book than this.

Good Luck

Emilio Tomisini and Urban Jaekle”

The only downside to the book that I found was the use and reference to TradeStation code, which is not a platform that I personally use for my trading.

BookWorms Rating - 4 Stars

For anyone interested in trading systems development this book will rate very highly, however because of the very specific focus of the book I have awarded it 4 stars.


Buy Now From The
Systems For Traders
BookShop

I ordered this via your link and it arrived today, which is impressive. Looking forward to reading it.

SC

Thank you SC - Look forward to hearing your comments - We also read this and found it interesting, in particular that there are some "measuring/performance" calculations which we will look to incorporate into our reviews eventually.

Tradestation code - would there be any interest in MT4 versions of this code?

zorba_g,

Our question would be - Would there be any reason that the author may object to this - Yes, the code is provided in the book in TradeStation format but it is not provided freely on the internet as far as we believe.