Trading books that dont shy away from the math

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aukie

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aukie said:
Is there any trading books that aren't afraid to write down a few formulas or that dont dumb down the content.

I always read things like "statistics is very improtant in building trading sytems" but no books i've come accross delve into the details. At most they give a dumbed down account of stats somewhere in the book.

Original question asked at,
http://www.trade2win.com/boards/first-steps/116048-technical-analysis-books-dont-shy-away-maths.html

but I think this a more appropriate place.
Click to expand...

To be honest, I can't think of many trading books that are worth bothering with. If you want to learn, there's lots of good stuff on here and other forums like forex factory.

At some point you should read Reminiscences of a Stock Operator, although not until you've been through the wringer yourself (you'll get a lot more out of it that way).

Other than that, Martin Pring is probably worth reading, although it's hardly essential.
 
Plenty of arithmetic in 'Fooled by randomness'. It's not a particularly encouraging text for a trader, though.
 
I'm not quite sure why statistics would play a large role in a trading system. I can see probability playing a solid role though. In terms of analysing system performance you want to know about your win/loss ratio, risk/reward ratio and the probability of your setup and exit combinations.

The most useful book I have on system building is Van Tharp's "Trade Your Way to Financial Freedom", but I don't recall him using that much in the way of direct formulae.

The most mathematical books I've come across are the two systems books I have: John Bollinger's "Bollinger on Bollinger Bands" and J Welles Wilder's "New Concepts in Technical Trading Systems". They both go in to some detail on the mathematics behind their indicators, but neither sent me scurrying away to dig out a maths book to understand them.

I reread your original question. In terms of building a tradable system the psychology of the trader is really important and it often seems that the weak point of most systems is the trader himself. If you need any evidence there are threads all over this board with traders kicking themselves for trading emotionally or outside their system for psychological reasons. Been there, done that, derailed the odd system too.
 
aukie said:
Is there any trading books that aren't afraid to write down a few formulas or that dont dumb down the content.

I always read things like "statistics is very improtant in building trading sytems" but no books i've come accross delve into the details. At most they give a dumbed down account of stats somewhere in the book.

Original question asked at,
http://www.trade2win.com/boards/first-steps/116048-technical-analysis-books-dont-shy-away-maths.html

but I think this a more appropriate place.
Click to expand...

Go to Barnes and Noble and take a look into this book, there are lots of calculations and formula, and if you like to work with the various calulationg formula, this should be it.

http://www.amazon.com/New-Trading-Systems-Methods-Wiley/dp/047126847X

The older version is much cheaper, there is no reason to buy the "new" version.
http://www.amazon.com/Trading-Syste...=sr_1_1?s=books&ie=UTF8&qid=1295800696&sr=1-1
 
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hmmm thanks for the input everybody, maybe I'm looking for something that doesnt exist.

Jason: I had a brief look at crabel, maybe this is something to delve deeper into in the future. On the outset it seems like a standard quantitative trading text, brief wordy discussions of various strategies and posted results... the how to and why certain statistical measures were used seems to be missing (but thats probably a good thing for the more experienced trader).

arithmetic ... love the sarcasm!

Pazienza, greigmcl ... cheers for your input... i get the impression you can make do without the complicated mathematics to design basic systems ... I think I'll persue this line of thought more carefully

I'm just very mathematically orientated, I assumed that coding a strategy would benefit from the rigour of maths (in fact i've come accross some papers that have me somewhat excited), and the testing of its performance, effectively requires some statistical techniques... But I guess these are kind of bells and whistles ... a trader can make do without, or perhaps not!! seems like a matter of opinion ... but as Pazienza suggests, i guess i'll never find out until i get my feet wet.

Regards ... A
 
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I kid you not songcon! coincidently as you were posting that thread I was buying that book ... as mentioned in my first thread its one of the few books I found that doesn't shy away from the math! ... also thanks Charlton, I'll look into these resources.
 
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try "quantitative trading" by ernie chan... loads more books like that if you like it.

or maybe something on volatility trading?
 
even though its mathematical content is slim, I am currently reading ernie chan's book, I have to say there is valuable information in this book... Great first book for me,... gives you a quick overall picture.

Volatility trading is something I might get into in the future... but yeah i do love the math behind option pricing ... even if martingale theory is somewhat inaccurate!
 
aukie said:
i get the impression you can make do without the complicated mathematics to design basic systems ... I think I'll persue this line of thought more carefully

I'm just very mathematically orientated, I assumed that coding a strategy would benefit from the rigour of maths
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I gave you some links for highly mathematical views of the market, but you will find that many members of this forum do not use indicators but only use price action to determine entries and exits

This is an area you must decide for yourself. You will soon realise that the subject of indicators vs no indicators often results in heated debates on this and other trading fora.

Also remember that there are other aspects to building a strategy, namely, risk management, position management and money management to which you can apply your mathematical brain.

Charlton
 
Thanks Charlton, that clears the haze somewhat... can you direct me to a good discussion on the topic, I would love to know the main points for and against... incidentally do you trade with any of the DSP techniques mentioned in your referrences...

Its seems like a good approach ... tools used by telecomunication engineers to filter broadcasted signals over some fuzzy media... could be used to filter price waveforms... (I did some DSP back at uni)
 
From personal experience, I'd avoid the DSP/Ehler stuff. Ehlers concept is this : Sound moves in waves, markets appear to move in waves. DSP techniques can be used against sound waves and so DAP techniques can be used against market waves. What you end up with is a bunch of oscillators that turn after the market - some sooner than others. There is scant evidence that anyone, including Ehler, made any money trading this stuff.

What I would look at is "Modelling Financial Time Series" by Stephen J Taylor, which is a study of various models developed in the mid 80's to the mid 00's. It discusses ARCH & Stochastic volatility models that are usde by quantitative analysts in banks.

Weekend reading, it is not.
 
aukie said:
Its seems like a good approach ... tools used by telecomunication engineers to filter broadcasted signals over some fuzzy media... could be used to filter price waveforms... (I did some DSP back at uni)
Click to expand...

It isn't. It's merely Ehler taking what he was good at and overlaying it on top of the market.

There is no reason why it should work. It makes as much sense as a dentist attempting to use his skills in ballroom dancing.
 
There's plenty of maths and formulas in Kaufman. Trading Systems and Methods.

I must confess, not read it yet, but a quick flick through and it's full to the brim with ideas and pointers.
 
aukie said:
even though its mathematical content is slim, I am currently reading ernie chan's book, I have to say there is valuable information in this book... Great first book for me,... gives you a quick overall picture.

Volatility trading is something I might get into in the future... but yeah i do love the math behind option pricing ... even if martingale theory is somewhat inaccurate!
Click to expand...

2 b honest I think there are two paths you can take on the maths front.

The first one is just learning about econometrics and staticstic, and then applying these skills to normal trading strategies - thinks like testing dummy variables, autocorrelation and skew are just like normal backtesting but a bit more math-based.

the other way is to go down the option-quant route, where there are people like wilmott and rebonato (hedger and the fox) which have lots of math but arent really any use to a retail punter in my opinion.
 
I wish I was clever like you lot :cry: I don't even understand these words never mind what it would say about them in the books :eek:
 
megamuel said:
I wish I was clever like you lot :cry: I don't even understand these words never mind what it would say about them in the books :eek:
Click to expand...

a Dummy Variable is like the end of the show on blind date: it's a variable, but the writing already on the wall.

autocorrelation is what Andrea Corr's car is to her sister Carolines car.

Skew is what you put your chicken on before a bbq


:cheesy:
 
I'm JUST smart enough to know that you are mocking me! But you are very funny so I'll let you off :cheesy:
 
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