Do you believe there are patterns in the financial markets that can be taken advantage of?
What if you could see patterns in the financial markets that less than 1 in 1000 day traders were aware of?
I'll never forget the first time I (Richard) lost significant money in trading. It was early 2010 and I bought TLT after it had taken a significant run up. After I bought it, it began to decline almost daily for the next month. When the pain was more than I could bear, I sold it, locking in what for me was a huge loss. To pile on, not long after I sold it, TLT reversed course and began to rise. Why did I buy TLT when I did? Because of certain things I saw in the charts, and macroeconomic considerations. I was very wrong.
Our background is physics, and physicists like to understand what's going on underneath the hood when they observe a system evolving. For things like the stock market and bonds, economics seems to be a place to start. But this is often only true in the long run, and as Keynes said, "In the long run, we're all dead".
So to prevent the TLT fiasco from happening again, we decided to answer the question, "Is there a systematic way to profit in the financial markets, using an algorithm, so that the computer tells us when to buy and sell?" At least it would alleviate some of the emotional burden, and maybe even produce profits.
This is our motivation, remove emotion and discretion from trading, while simultaneously being profitable. The approach we have taken in this quest is a search for patterns. For flexibility and applicability, we wanted to keep our assumptions to a minimum:
1) There are simple models which can be used to describe the behavior of financial markets.
2) The models have statistical patterns associated with them that can be taken advantage of.
3) The patterns may change over time, but there are trading strategies that can adapt to the changes.
isn't for everyone. Here are 4 reasons why you may decide not to buy this book:
1) You don't believe there are patterns in the financial markets that can be used to trade profitably.
2) You don't like thinking quantitatively, and you don't know a thing about programming (programming is useful to go beyond the simplest strategies).
3) You want to continue to lose money like most other traders.
4) You're happy to run with the herd and do what everyone else is doing.
Here is what Perry Kaufman, author of has said about a previous version of this ebook:
The strategies revealed in this ebook do not require large amounts of historic data, and can be implemented on any time scale.
They say that to solve a difficult problem, sometimes all you need is a change in perspective. This ebook provides a view of financial data you won't find elsewhere.
These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.