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

By Richard L. Weissman

A wide variety of flexible trading systems that combine sophisticated technical analysis with trading psychology theory Mechanical Trading Systems examines the development process for choosing and using mechanical trading systems in conjunction with trader psychology. This book discusses the advantages and disadvantages of mechanical trading systems; the dangers in system development and how to avoid them; the optimal methods for back-testing trading systems; position sizing and other risk quantification tools; and methods of improving rates of return on investments without significantly increasing risk. Most importantly, through a detailed examination of various types of unsuccessful trader personality traits (e.g., fearfulness, greed, and impatience), the book recommends different types of trading systems for a diverse array of trader types. Richard L. Weissman (Port Richey, FL) has seventeen years' experience as a trader and developer of trading systems. He currently provides independent consultation an d training services to traders and risk management professionals in the areas of technical analysis, risk management, and trader psychology.

• Format: Hardcover
• Language: English
• ISBN: 0471654353
• ISBN13: 9780471654353
• Release Date: December 2004
• Publisher: Wiley
• Length: 217 Pages
• Weight: 0.97 lbs.
• Dimensions: 9.4" x 0.8" x 6.1"

Customer Reviews

Not for everybody - just those who want to learn how to trade with a focus on emotional and risk man

I find it refreshing that this is NOT a how to beat the market and get rich quick book. Richard Weissman is a trader who knows how to make disciplined trades while managing his risk and his emotions. He makes it very clear that this is not the same as investing; instead his process is focused on exploiting short-term trends and break outs using a mechanical system that strips the subjectivety and emotion from the trade. He also discloses that the proprietary strategies he personally trades differ from those employed in the book (as another reviewer notes). That's not the point. It's up to you to build your own strategy that fits your style, risk appetite and current market conditions. Weissman is giving you the guidance and discipline to achieve this since no techincal strategy works all the time and requires refinement as you become more experienced. I recommend this for the serious trader who wants to learn more about risk-managed trading.

Psychology + Methods = a winning combination!

The book is written in a clear, direct language - the author speaks to you, not at you. While leafing through a pile of trading books, I was stopped it in my tracks when I opened this volume. I got out my yellow highlighter and read attentively from cover to cover, taking notes. The author's unique approach was to combine traders' psychology with different types of trading; this book showed me something new about myself and other traders. Weissman begins by explaining why "...natural and comfortable trading, using entry levels as reference points, ensures small profits and large losses. We need to reprogram ourselves to be comfortable with the unknowable and uncertain future. It helps to remind ourselves that the entry level is significant to us alone and that the sense of discomfort we feel as the market moves into previously unknown territory is entirely subjective and illusory." Weissman outlines the three basic trader personality types: trend-following, mean-reversion [counter-trend], and day-trading. You need to be comfortable with yourself to trade well. You need the right system for your trading personality - and the author offers a rich menu for every type of trader. The author's practical, shrewd observations hold up a psychological mirror for traders. He points out that with trend-trading, just a few trades account for the bulk of profits, which means you cannot take time off from mechanical trend trading. Mean-reversion traders capitalize on temporarily unsustainable levels of euphoria or panic; they need an especially strong discipline not to overstay positions. Day-trading is labor-intensive, demands quick-mindedness and frequent vacations to avoid burnout. The author shows how to test trend-following and mean-reversion (counter-trend) systems, as well as day-trading systems. He deals in depth with the benefits and pitfalls of system development and price risk management. "Successful trading entails fighting natural inclinations toward comfort, security, impatience, perfection, fear, and greed. We can never control the markets, only how much risk we will assume in them." Weissman stresses the importance of keeping a trading journal. He confirms something that very few people appreciate - that at a very high end systematic and discretionary trading have a great deal in common. Weissman's gentle but persistent insistence on both knowing yourself and stepping out of your comfort zone can have unusual results. In my case, it led me to develop a semi-mechanical system for day-trading e-minis!

Teaching you how to BUILD systems - Refreshing!

If you are looking for a get rich quick scheme where you get ready made systems that will turn your measly $2K into $500K in a year, keep searching. How refreshing that this author has avoided the temptation to sell tons of books by promising that mechanical trading systems presented in a book will accomplish this ridiculous claim! Instead this book teaches you how to build mechanical trading systems. Not only does it provide readers with tools that are applicable to all systems (trending, mean reverting, etc.,), but it also shows you how to build these systems according to your individual trading personality. Finally it avoids the typical trader "war stories". Instead of colorful, useless stories of the crash in 1987, this book actually sticks to the point... teaching you how to develop systems that fit your personality.

Good Stuff!!

If you trade, this book is worth every penny of the price. It maps out the whole spectrum of trading systems based on time frames and personality traits. I hope that it will finally force sellers of trading systems to "raise the bar" from where they are now - which assumes that "one system fits all", to where they should be, "let me build a system that matches your trading style". -

great trading book

This is the only trading book you will ever need - it covers trader psychology, system development, technical analysis and price risk management. It deserves to share the shelf with classics like Market Wizards and Reminiscences of a Stock Operator. I wish it had been published at the beginning of my trading career!