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Trade with the Odds: How To Construct Market-Beating Trading Systems, + Website

Book Description

Hands-on tools to identify and profit from the market's recent patterns

Trading is all about managing probabilities. In Trading with the Odds, Anthony Trongone explains that the quest for developing a perfect system, which drives most traders, is fruitless. Instead, traders should focus on developing the analytic and trading skills necessary to stay in tune with the constant evolution of the financial markets. In this book, Trongone emphasizes the importance of testing and monitoring trading strategies and raw market data as a means of developing an edge over other traders who are unwilling to get their hands dirty and dig into the data on a continuing basis.

Importantly, he shows that Excel, a program almost all traders are familiar with, can be utilized to measure virtually every important aspect of trading system performance and to search for tradable market patterns. In addition, the book includes several applications that will allow you to calculate current market conditions and market patterns based on time of day, intermarket relationships, and other factors.

  • Advocates an analytical approach which evolves in concert with changing market conditions

  • Explains why it's hard to make money from off-the-shelf systems and indicators

  • Provides in-depth analysis of other major industries generating worthwhile IPOs

  • Includes applications that allow users to calculate recent market patterns

Underlying Trongone's approach is the conviction that traders must constantly innovate in response to the market, and those that rely on static analysis, will fail to achieve the results they expect.

Table of Contents

  1. Cover
  2. Contents
  3. Title
  4. Copyright
  5. Dedication
  6. Preface
    1. A Workable Approach to Playing the Percentages
    2. Using This Book to Supplement Your Existing Programs
    3. Creative Flexibility
  7. Acknowledgments
  8. Chapter 1: Invest in Yourself, Not a Trading System
    1. Are You Good at Decrypting Chart Patterns?
    2. Beware of Ineffective Solutions
    3. Running in Place
    4. Supplementing Your Analysis: A Restrictive Trading System
    5. Working Hypothesis
    6. Modifying Your Behavior for Better Results
  9. Chapter 2: Playing the Percentages
    1. A Data Revolution: Fantasy Sports and False Leads
    2. False Leads
    3. Exploratory Study
    4. When the Percentages Go Astray
    5. Developing a Constructive Strategy
    6. Summary
  10. Chapter 3: Performance Measures
    1. Measuring Return
    2. Discrepancies When Measuring Return
    3. When to Convert a Price Change to Percentage Score
    4. Outlying Scores
    5. Statistical Functions
    6. Median Score
    7. Risk Is a Moving Target
    8. Quartiles
    9. Percentiles
    10. Comparison of Two Percentile Functions
    11. Correlation
    12. Drawbacks of Correlation Analysis
    13. Summary
  11. Chapter 4: Extracting Performance Results
    1. IF Statements
    2. Performance Equations
    3. Instructions for Automating the Process
    4. Study: Appleā€™s Performance after Dark
    5. Lagging Ahead
    6. The Effect of the RTS on the OVS
    7. Power at Your Fingertips
    8. Summary
  12. Chapter 5: Monitoring Performance
    1. Tracking Success
    2. Monitoring Performance
    3. Reasons for Monitoring Performance
    4. Performance Differences among Companies
    5. Google It!
    6. Achieving Mythical Proportions
    7. Tracking a System without Continuous Scores
    8. Three-Day Performance Study
    9. Summary
  13. Chapter 6: Breaking Down a Stock or Commodity
    1. ES Contract versus the Spiders
    2. Early Morning Price Swings
    3. Price Range
    4. Early Morning Activity
    5. Bear versus Bull Market
    6. Harbinger to a Bull Market
    7. Flexible Statements
    9. Summary
  14. Chapter 7: Quantifying Risk
    1. Standard Deviation
    2. Tumbling Prices
    3. Beta Scores
    4. Applying Risk Metrics to Construct a Trading System
    5. Aggressive Selling Pressure
    6. Relief Rally
    7. Spotting the Cage, but No Bird
  15. Chapter 8: Trading in Trendless Markets
    1. Smoothing Scores to Spot Patterns
    2. Constructing Simple Moving Averages
    3. Simulation Analysis
  16. Chapter 9: Integrating Variables into a Moving Average
    1. SMAs in a Bullish Setting
    2. Categorizing Variables
    3. Contributory Variable
    4. Cross-Validation
    5. Long-Term Analysis
    6. Generating Interactive Profits
    7. Summary
  17. Chapter 10: Going against the Grain
    1. Crossover Moving Averages
    2. Contrasting Styles
    3. Trading Bands
    4. Pullbacks in Price
    5. Intraday Range
    6. Summary
  18. Chapter 11: Restrictive Trading Systems
    1. Going with Momentum
    2. After-Hours Performance
    3. Preventing Disaster
    4. Playing a Widening Range
    5. A Study Using Two Different Time Frames
    6. Trading Patterns
    7. Summary
  19. Chapter 12: Identifying the Shifting Characteristics of Volume
    1. Volume Distortion
    2. Volume Adjustment When Encountering an Excessive Loss
    3. Ranking Scores
    4. Disharmonious Narratives
    5. Trade Your Findings, Not the Axiom
    6. No Substitute for Thinking
    7. Early-Morning Trading Volume
    8. Thirty-Day Rolling Ranking
    9. Ranking Intraday Sessions
    10. Summary
  20. Chapter 13: Predictor Variables
    1. Setting the Stage
    2. Background of the Predictor Variable
    3. Eurozone Crisis
    4. Outlying Scores
    5. Price Brackets
    6. The Effect of the Euro on Gold
    7. Price Direction within a Category
    8. Summary
  21. Chapter 14: Cross-Hedging Strategies
    1. Size of Position
    2. Pricing Dissimilarities
    3. Outlying Scores
    4. Trading Volume as an Indicator
    5. Evaluation of SPY
    6. Evaluation of IWM
    7. Evaluation of QQQ
    8. Comparative Cross-Hedging System (CXS)
    9. Convergent/Divergent Methods
    10. SPY versus XLF
    11. Summary
  22. Chapter 15: Formulating Trading Decisions
    1. Prevent Excessive Bloodletting
    2. Trading with a Backstop
    3. Russell 2000 (IWM between 13:00 to 16:00)
    4. Defining Success
    5. Staying in Your Comfort Zone
    6. Transitional Developments
    7. Summary
  23. Chapter 16: Preparing for Success
    1. Asking Questions
    2. Sticking by Your Analysis
    3. Money Management
    4. Trading Philosophy
  24. Technical Appendix
  25. About the Companion Website
  26. About the Author
  27. Index