About the Book
"Award-winning trader Kevin Davey explains how he evolved from a discretionary to a systems trader and began generating triple-digit annual returns. An inveterate systems developer, Davey explains the process of generating a trading idea, validating the idea through statistical analysis, setting entry and exit points, testing, and implementation in the market. Along the way, Davey provides insightful tips culled from his many years of successful trading. He emphasizes the importance of identifying the maximum loss a system is likely to produce and to understand that the higher the returns on a system, the higher the maximum loss. To smooth returns and minimize risk, Davey recommends that a trader utilize more than one system. He provides rules for increasing or decreasing allocation to a system and rules for when to abandon a system. As market patterns change and system performance changes and systems that performed spectacularly in the past may perform poorly going forward. The key for traders is to continue to develop systems in response to markets evolving statistical tendencies and to spread risk among different systems. An associated website will provide spreadsheets and other tools that will enable a reader to automate and test their own trading ideas.Readers will learn: - The systems Davey used to generate triple-digit returns in the World Cup Trading Championships- How to develop an algorithmic approach for around any trading idea, from very simple to the most complex using off-the-shelf software or popular trading platforms.- How to test a system using historical and current market data- How to mine market data for statistical tendencies that may form the basis of a new systemDavey struggled as a trader until he developed an algorithmic approach. In this book, he shows traders how to do the same"--
Book Synopsis
Develop your own trading system with practical guidance and expert advice
In Building Algorithmic Trading Systems: A Trader's Journey From Data Mining to Monte Carlo Simulation to Live Training, award-winning trader Kevin Davey shares his secrets for developing trading systems that generate triple-digit returns. With both explanation and demonstration, Davey guides you step-by-step through the entire process of generating and validating an idea, setting entry and exit points, testing systems, and implementing them in live trading. You'll find concrete rules for increasing or decreasing allocation to a system, and rules for when to abandon one. The companion website includes Davey's own Monte Carlo simulator and other tools that will enable you to automate and test your own trading ideas.
A purely discretionary approach to trading generally breaks down over the long haul. With market data and statistics easily available, traders are increasingly opting to employ an automated or algorithmic trading system--enough that algorithmic trades now account for the bulk of stock trading volume. Building Algorithmic Trading Systems teaches you how to develop your own systems with an eye toward market fluctuations and the impermanence of even the most effective algorithm.
- Learn the systems that generated triple-digit returns in the World Cup Trading Championship
- Develop an algorithmic approach for any trading idea using off-the-shelf software or popular platforms
- Test your new system using historical and current market data
- Mine market data for statistical tendencies that may form the basis of a new system
Market patterns change, and so do system results. Past performance isn't a guarantee of future success, so the key is to continually develop new systems and adjust established systems in response to evolving statistical tendencies. For individual traders looking for the next leap forward, Building Algorithmic Trading Systems provides expert guidance and practical advice.
From the Back Cover
Praise for BUILDING WINNING ALGORITHMIC TRADING SYSTEMS
"Kevin Davey was awarded either first or second place three years in a row in the World Cup Championship of Futures Trading(R). I'm typically not impressed with that sort of performance, but I think Kevin is an exception. Why? First, he published my feedback about winning the contest and what he learned from it. He then goes on to not only give a complete approach to algorithms, but also talks about how your psychology can still sabotage you. Finally, he spends a lot of time talking about objectives and position sizing. This is a very impressive book."
--Dr. Van K. Tharp, author of Trading Beyond the Matrix: The Red Pill for Traders and Investors (Wiley), Founder, Van Tharp Institute, www.vantharp.com
"Kevin's book is a good beginner's guide to systems trading, a Trading Computer Strategies 101."
--Bob Pardo, Pardo Capital, author of The Evaluation and Optimization of Trading Strategies (Wiley)
"This book is a must read! It is not a simple list of rules to trade better; it is a journey through the trading life of the author. The author Kevin will let the man Kevin become your friend, sharing his path to becoming a successful trader."
--Andrea Unger, World Cup Championship of Futures Trading(R) Winner 2008, 2009, 2010, 2012
"Successful technical traders believe they have skills that allow them to beat the market. But are these traders really skillful or are they just lucky? This book details the experience of a successful trader who has devoted significant time to designing dynamic trading strategies that attempt to exploit market inefficiencies. Perhaps it is traders like these that drive markets towards efficiency, or perhaps these traders just have a deeper understanding of markets and human psychology and therefore are able to capture some rents. The debate on market efficiency will continue to rage. In the meantime, perhaps we can learn from this journey of a successful trader."
--Peter Ritchken, Kenneth Walter Haber Professor, Department of Banking and Finance, Weatherhead School of Management, Case Western Reserve University
"The winning trader is rare. The quantitative winning trader is even more rare. Kevin Davey's book Building Winning Algorithmic Trading Systems is the rarest of all gems. It is a book that tells the quantitative trader how to build a quantitative trading system. It should be the textbook for all would-be quantitative hedge funds. I highly recommend this book to all traders, even those that do not use quantitative methods."
--Kurt K. Sakaeda, World Cup Championship of Futures Trading(R) Winner 2000 and 2004
"This book is so much more than systems trading! I've encountered a plethora of trading books, but this book is the first that I've thoroughly enjoyed reading from cover to cover. Through personal accounts, he offers a candid, responsible, and highly colorful tour of the futures markets and system building. This book is not just for algo traders, nor is it just for a particular skill level; I believe traders of all types and sizes will find something in this book to better their odds of market success."
--Carley Garner, Senior Analyst at DeCarleyTrading.com
About the Author
KEVIN J. DAVEY is a professional trader and a top-performing systems developer. He generated triple-digit annual returns of 148 percent, 107 percent, and 112 percent in three consecutive World Cup Championships of Futures Trading(R) using algorithmic trading systems. His web site, www.kjtradingsystems.com, provides trading systems, trading signals, and mentoring. He writes extensively in industry publications such as Futures Magazine and Active Trader and was featured as a "Market Master" in the book The Universal Principles of Successful Trading by Brent Penfold (Wiley, 2010). An aerospace engineer and MBA by background, Davey has been an independent trader for over 20 years. Davey continues to trade full time and develop algorithmic trading strategies.
