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Building Winning Algorithmic Trading Systems : A Trader's Journey From Data Mining to Monte Carlo Simulation to Live Trading - Kevin J. Davey

Building Winning Algorithmic Trading Systems

A Trader's Journey From Data Mining to Monte Carlo Simulation to Live Trading

Paperback Published: 11th July 2014
ISBN: 9781118778982
Number Of Pages: 288

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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.

Industry Reviews

?This is a great book to get a much better understanding of what in really involved in system development and help on your journey from someone with a lot of real-life trading experience. For those already working with systems, it may challenge some of the approaches you use and help you to become a better system developer and trader. From my perspective, the chance to look over Kevin?s shoulder and see the concepts and full code from some systems he has been using in his own trading alone would be of far more value than the cost of the book.?
?Tim Rea, Proprietary systems developer/trader; 1st place winner, World Cup Championship of Futures Trading® 2011

?Part Reminiscences of a Stock Operator and part Market Wizards, Kevin Davey has written a superb book for the modern trader. Not only does Kevin provide a step-by-step plan on how to develop algorithmic trading strategies but he actually reveals the strategy he used to win The World Cup Championship Of Futures Trading® along with two additional euro currency systems. I have no doubt this will become a popular and often referenced book amongst traders. Readers will find Kevin?s humble and engaging voice easy to follow and grasp. They will also find his personal journey from aerospace engineer to beginner trader, to a championship winning trader and finally to a full time professional trader insightful, entertaining, and inspiring. Wiley should also be congratulated for recruiting a real trader who trades real markets with real money to write a trading book for people aspiring to become real traders. I highly recommend this book to anyone who is serious about developing a successful and sustainable trading career.?
?Brent Penfold, professional trader and author of The Universal Principles of Successful Trading (Wiley 2010)

?Few trading books on the market today are written by those who actually make their living from trading and those that are frequently suffer from being unintelligible to the layman. Kevin Davey has the authenticity of a real trader and the ability to distill complex ideas into a format that is easy to read and, at times, brutally honest. For those aspiring to trading success, Kevin gives a step by step guide on how to approach systems development as well as outlining many of the pitfalls to avoid and throughout the book he provides a wealth of information and tools that will prove invaluable to novice or expert alike.?
?Michael Cook, Founder, Katmai Capital Advisors; World Cup Championship of Futures Trading® 2007

?Of all the trading books that I?ve read, this book takes the cake. Kevin Davey brings us a realistic perspective in an industry full of dreamers. I suggest that all traders drop what they?re doing and read the incredibly valuable lessons summed up in this book.  This book is the quickest path for a new trader to stop dreaming and start succeeding.?
?Peter Hagen, Citracado Capital, LLC

Acknowledgments ix

About the Author xi

Introduction 1


CHAPTER 1 The Birth of a Trader 9

CHAPTER 2 Enough Is Enough 15

CHAPTER 3 World Cup Championship of Futures Trading Triumph 23

CHAPTER 4 Making the Leap?Transitioning to Full Time 33


CHAPTER 5 Testing and Evaluating a Trading System 43

CHAPTER 6 Preliminary Analysis 53

CHAPTER 7 Detailed Analysis 61

CHAPTER 8 Designing and Developing Systems 71


CHAPTER 9 Strategy Development?Goals and Objectives 79

CHAPTER 10 Trading Idea 83

CHAPTER 11 Let?s Talk about Data 93

CHAPTER 12 Limited Testing 103

CHAPTER 13 In-Depth Testing/Walk-Forward Analysis 115

CHAPTER 14 Monte Carlo Analysis and Incubation 129

CHAPTER 15 Diversifi cation 133

CHAPTER 16 Position Sizing and Money Management 139

CHAPTER 17 Documenting the Process 147


CHAPTER 18 Goals, Initial and Walk-Forward Testing 155

CHAPTER 19 Monte Carlo Testing and Incubation 163


CHAPTER 20 Account and Position Sizing 177

CHAPTER 21 Trading Psychology 187

CHAPTER 22 Other Considerations before Going Live 195


CHAPTER 23 The Ins and Outs of Monitoring a Live Strategy 205

CHAPTER 24 Real Time 219


CHAPTER 25 Delusions of Grandeur 235

Conclusion 243

APPENDIX A Monkey Trading Example, TradeStation Easy Language Code 247

APPENDIX B Euro Night Strategy, TradeStation Easy Language Format 255

APPENDIX C Euro Day Strategy, TradeStation Easy Language Format 259

About the Companion Web Site 263

Index 265

ISBN: 9781118778982
ISBN-10: 1118778987
Series: Wiley Trading
Audience: General
Format: Paperback
Language: English
Number Of Pages: 288
Published: 11th July 2014
Publisher: John Wiley & Sons Inc
Country of Publication: US
Dimensions (cm): 23.62 x 18.8  x 1.47
Weight (kg): 0.48
Edition Number: 1

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