Trading Books:
‘Mechanical Trading Systems’
by Richard L. Weissman

Trading Books: 'Mechanical Trading Systems'
Author: Richard L. Weissman
Publisher: John Wiley & Sons, Inc
Year: 2005

Book Review Rating:
**** Highly recommended

Topics Covered:

  • Trading Strategy
  • Trading Systems
  • Trading Signals
  • Trend Trading Systems / Trend Following Systems
  • Mean Reversion Trading Systems
  • Short term and Day Trading Systems
  • Trading Psychology

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Review:

Mechanical Trading Systems by Richard L. Weissman is an outstanding book for anyone interested or actively using trading systems. The book lays a solid groundwork by dispelling many common myths about trading and trading systems and describing the building blocks for common trading strategies.

Weissman then goes on to provide an excellent discussion on the different types of trading indicators, why they work and how they can be incorporated into your trading systems. The method used to evaluate the trading signals and indicators is useful and provides a structure to ensure indicators are not just accepted on blind faith, but evaluated objectively before employed in a trading system.

The discussion on each style of trading system is thorough and extremely helpful. Weissman uses a common format for each approach which talks about psychology, portfolio construction and some example trading systems in each category. The trading rules for each system presented are disclosed and can be readily translated into your own trading software.

The trading systems presented are compared using a number of useful performance metrics. The system performance evaluation gives the reader a good understanding of the strengths and weaknesses of each trading style and trading system.

The trading psychology section is practical and pragmatic. After studying this section the reader will have a good idea what sort of trader they are and which trading strategy is most suited to them.

The section on trading system development provides many practical considerations and again serves as a pragmatic approach to developing and optimizing a trading system. A more detailed discussion of these topics can be found in other books (especially: Pardo), however, this section is a strong primer or a useful refresher depending on your experience level.

Of particular value is the discussion on improving rates of return through diversification. This section is worth many times the cost of the book and when correctly implemented should greatly improve trading performance. This is one of few trading books that discusses trading system diversification in this manner.

Conclusion:

Mechanical Trading Systems is highly recommended for anyone interested in Trading Systems and systematic trading.

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 Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis (Wiley Trading)

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