Trading Systems: A New Approach to System Development and Portfolio Optimisation by Emilio Tomasini and Urban Jaekle

Summary: One of the better trading system design intro for anyone interested in trading system development and deployment. Covered all aspects of trading system design in relatively understandable language for people without scientific research background. Example trading models are provided for open discussion. Highly recommended to not just those interested in systematic trading but also discretionary traders.

Review

First part of the book is a walk-thru of trading system design – what it is, the components, and evaluatation methods. What separate this book from other ones is that it raised the right questions and answered them honestly. The authors have done a great job in explaining the concepts clearly without going into too much statistics treatement which is always a good thing.

Now you should know it is not a book giving you a holy grail trading system that print money so fast you cannot believe. It is a practical handbook showing people that it is possible to build profitable systems that are robust and functional as long as you have the proper expectation of what a trading model can do for you.

Second part of the book focus on the development of a trading model that trades cable (British pound US dollar). It is essential a moving average crossover system. The authors then show that by proper evaluation of the characteristics of the behaviour of cable post entry, how you can turn this basic concept into a reasonably performing model. This is essentially the core framework of a functional approach to trading system design.

By having the example model in place, they continue to explain how other factors come into play. Each topic in this area has its own chapter with concepts and applications demonstrated on the example model.

Third part of the book is a bit short as it deals with portfolio system testing. It is just a touch of the subject but necessary because some good trading models work better on a portfolio basis.

As a bonus the authors included extra trading models in the appendix section. I guess you have to throw in more systems to convince people the book worths its price. Jokes aside, the examples are good showcase of trading models.

I highly recommend this book to everyone. For traders interested in buying trading models, this book can help them become informed buyers. Traders who want to develop their own trading models will find the framework useful. And for discretionary traders, it is a good idea to know the players across the table.

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