Cybernetic Trading Strategies: Developing a Profitable Trading System with State–of–the–Art Technologies

"The computer can do more than show us pretty pictures. [It] can optimize, backtest, prove or disprove old theories, eliminate the bad ones and make the good ones better. Cybernetic Trading Strategies explores new ways to use the computer and finds ways to make a valuable machine even more valuable." from the Foreword by John J. Murphy.

Until recently, the computer has been used almost exclusively as a charting and data–gathering tool. But as traders and analysts have quickly discovered, its capabilities are far more vast. Now, in this groundbreaking new book, Murray Ruggiero, a leading authority on cybernetic trading systems, unlocks their incredible potential and provides an in–depth look at the growing impact of advanced technologies on intermarket analysis. A unique resource, Cybernetic Trading Strategies provides specific instructions and applications on how to develop tradable market timing systems using neural networks, fuzzy logic, genetic algorithms, chaos theory, and machine induction methods.

Currently utilized by some of the most powerful financial institutions in the world including John Deere and Fidelity Investments today′s advanced technologies go beyond subjective interpretations of market indicators to enhance traditional analysis. As a result, existing trading systems gain a competitive edge. Ruggiero reveals how "incorporating elements of statistical analysis, spectral analysis, neural networks, genetic algorithms, fuzzy logic, and other high–tech concepts into a traditional technical trading system can greatly improve the performance of standard trading systems." For example: spectral analysis can be used to detect when a market is trending earlier than classical indicators such as ADX.

Drawing on his extensive research on market analysis, Ruggiero provides an incisive overview of cyber–systems systems that, when applied correctly, can increase trading returns by as much as 200% to 300%. The author covers a wide range of important topics, examining classical technical analysis methodologies and seasonal trading, as well as statistically based market prediction and the mechanization of subjective methods such as candlestick charts and the Elliott Wave. Precise explanations and dozens of real–world examples show you how to:

Incorporate advanced technologies into classical technical analysis methodologies. Identify which of these technologies have the most market applicability. Build trading systems to maximize reliability and profitability based on your own risk/reward criteria.

Most importantly, Cybernetic Trading Strategies takes you step by step through system testing and evaluation, a crucial step for controlling risk and managing money.

With up–to–date information from one of the field′s leading authorities, Cybernetic Trading Strategies is the definitive guide to developing, implementing, and testing today′s cutting–edge computer trading technologies.

Partial table of contents:

CLASSICAL MARKET PREDICTION.

Classical Intermarket Analysis as a Predictive Tool.

Seasonal Trading.

Trading Using Technical Analysis.

The Commitment of Traders Report.

STATISTICALLY BASED MARKET PREDICTION.

A Trader′s Guide to Statistical Analysis.

Cycle–Based Trading.

Using Statistical Analysis to Develop Intelligent Exits.

Using System Feedback to Improve Trading System Performance.

MAKING SUBJECTIVE METHODS MECHANICAL.

How to Make Subjective Methods Mechanical.

Building the Wave.

TRADING SYSTEM DEVELOPMENT AND TESTING.

Developing a Trading System.

Testing, Evaluating, and Trading a Mechanical Trading System.

USING ADVANCED TECHNOLOGIES TO DEVELOP TRADING STRATEGIES.

Developing a Neural Network Based on Standard Rule–Based Systems.

Using Genetic Algorithms for Trading Applications.

References and Readings.

Index.

MURRAY A. RUGGIERO, JR. develops marketing timing systems using advanced technologies. Previously, he was a vice president with Promised Land Technologies, Inc., and the inventor of a patented method for embedding a neural network into a spreadsheet. He has been researching advanced technologies since 1988 and was featured in BusinessWeek as one of the leading experts using neural networks in finance and investing. Mr. Ruggiero has been contributing editor to Futures magazine since June 1994 and has a monthly column, "Trading and Technology."