An edition of Beat the Market with a Provable Trading System at Low Risk
(2009)
Beat the Market with a Provable Trading System at Low Risk
by Jerry Felsen
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This book describes an advanced computer-based Options Trading System for which we can prove that it should make money with a relatively low risk—both theoretically and practically—by using this system to successfully manage our First Alpha Fund.
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Commerce, data processing| Edition | Availability |
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Beat the Market with a Provable Trading System at Low Risk
2009, Lulu Press
Paperback
0557120012 9780557120017
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Book Details
Table of Contents
CONTENTS
Part 1: ANALYSIS
1 ANALYSIS OF THE OPTIONS MARKET 2
1.1 Advantages of Options 2
1.2 What is an Option Contract 3
1.3 Basic Options Trading Concepts and Terms 3
1.3.1 The Option Writer, 4
1.3.2 The Option Buyer, 5
1.3.3 The Options Clearing Corporation, 5
1.4 Features of Options 6
1.4.1 Price of the Option, 7
1.4.2 The Relevance of Volatility, 9
1.5 The “Greeks” 9
1.5.1 Delta, 9
1.5.2 Theta, 11
1.5.3 Gamma, Vega, and Rho. 11
1.6 Skew Between Equidistant Calls and Puts 11
1.7 The Underlying Security 13
1.8 Complex Hedged Options Positions 14
1.8.1 Spreads, 14
1.8.2 Straddles, Strangles, and Condors, 16
1.8.3 Other Hedged Positions, 17
1.9 How To Get More Information About Options Trading 17
2 TECHNICAL ANALYSIS OF STOCK TRENDS 19
2.1 Definition of Technical Analysis 19
2.2 Technical Features of our Underlying Stock 20
2.3 Definition of a Trend 21
2.3.1 Our Trend Classification, 21
2.3.2 How to Draw a Trendline, 22
2.3.3 How to Identify Trend Reversals, 22
2.4 The Most Common Technical Chart Patterns 24
2.4.1 Resistance and Support Levels, 24
2.4.2 Continuation and Reversal Patterns, 24
vi
CONTENTS vii
2.4.3 Trend Reversal Patterns, 26
2.4.4 Choppy Markets, 27
2.4.5 Where to Find Charts, 27
2.5 Seasonal Tendencies in the Stock Market 27
2.6 Technical Trading Systems 29
2.6.1 Trend Following Systems, 29
2.6.2 Breakout Systems, 30
2.6.3 Channel Resistance and Support Schemes, 30
2.6.4 Other Technical Systems, 30
2.7 Our Trend Following Reversal System 32
2.8 Can Technical Analysis Predict the Future of the Market? 33
2.9 Final Comments 34
3 CYBERNETIC APPROACH TO STOCK MARKET
ANALYSIS 35
3.1 Introduction 35
3.2 The Relevance of Cybernetic Disciplines to the Design
of Trading Systems 35
3.3 Implications of the Law of Requisite Variety for the
Design of Trading Systems 37
3.4 Human Information Processing Limitations in
Decision Making 38
3.5 The Usefulness of Artificial Intelligence 38
3.5.1 Our POTS is a Knowledge Based System, 39
3.5.2 How POTS Performance May be Improved through
Machine Learning, 39
3.6 We may Ultimately Implement Our POTS as an
Expert System 41
Part 2: DESIGN
4 CONCEPTUAL AND GENERAL DESIGN 43
4.1 The Three Pillars of Our POTS 43
4.1.1 The State-Subsystem Mapping, 43
4.1.2 The Growth Position, 44
4.1.3 Continually Follow the Current Trend, 44
viii CONTENTS
4.2 The Concept of State 44
4.2.1 State of the Market, 44
4.2.2 State of Our Portfolio, 45
4.2.3 State Continuation Principle, 45
4.3 Hierarchical Structure of Our POTS 45
4.3.1 Main Control Subsystem, 47
4.3.2 Main Trading Subsystems, 47
4.4 The Game of Chess is a Good Model of our POTS 47
4.5 General POTS Trading Procedure 48
4.6 Proof that POTS Beats the Market 49
5 DETAILED DESIGN 51
5.1 The Concept of a Frame 51
5.1.1 The GroP Frame, 51
5.1.2 Trend-Following Frames, 53
5.1.3 Comparative Analysis of our Frames, 53
5.2 Our Trading Subsystems 53
5.2.1 The Main Subsystem, 54
5.2.2 Trend Following Subsystems, 54
5.2.2.1 Fast Trend-Following Subsystems, 55
5.2.2.2 Slow Trend-Following Subsystems, 56
5.2.3 Subsystem for Choppy and Trendless Markets, 56
5.2.4 Safe Income Growth System, 58
5.3 How to Automate the SSMap 58
5.4 POTS Trading Stratagems 59
5.5 How to Roll Into Next Expiry Month 60
5.6 Maximize POTS Optimization 60
5.7 Risk Control 61
Part 3: IMPLEMENTATION
6 HOW TO BUILD OUR TRADING PLATFORM 63
6.1 How to Select the Platform’s Components 63
6.1.1 Relevant Aspects of Computer Networking, 63
6.1.2 How to Get the Computer Hardware System, 64
6.1.2.1 Finding a Modem, 64
6.1.3 Computer Operating Systems, 65
6.1.4 Connecting to the Internet, 65
6.1.5 Finding Trading Software, 66
CONTENTS ix
6.2 Selecting a Broker 66
6.3 System Security 67
6.4 How to Backup Your Trading Platform 67
6.5 Direct Access Trading 68
6.6 Our Trading Platform 68
7 THE INTERACTIVE BROKERS TRADER
WORKSTATIONSM 70
7.1 Introduction 70
7.2 Get Started 70
7.3 The Trading Window 71
7.3.1 Using the Trading Window, 72
7.4 Monitoring Your Account 73
7.5 Risk Analytics 73
7.6 Technical Analytics 75
7.7 Other Features of the IB TWSSM 75
7.8 How to Get More Information About the IB TWSSM 76
Part 4: OPERATION
8 HOW TO MAKE A TRADING PLAN
8.1 Introduction 78
8.2 How to Make a Trading Plan 78
8.3 Planning Stratagems 79
9 A TRADING EXAMPLE 82
9.1 Introduction 82
9.2 Our Position Map 82
9.3 Our Trading Example 84
All service marks are the property of Interactive Brokers LLC
x CONTENTS
Part 5: MAINTENANCE
10 MAINTENANCE OF POTS 93
10.1 Measuring POTS Performance 93
10.2 Improving POTS Performance 94
10.3 Suggestions for Further Research 94
GLOSSARY AND INDEX 96
Edition Notes
The Physical Object
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| October 17, 2022 | Edited by ImportBot | import existing book |
| August 4, 2010 | Edited by George | Edited without comment. |
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