A newly expanded and updated edition of the trading classic,Design, Testing, and Optimization of Trading Systems
Trading systems expert Robert Pardo is back, and in TheEvaluation and Optimization of Trading Strategies, a thoroughly revised and updated edition of his classic text Design, Testing ,and Optimization of Trading Systems, he reveals how he has perfected the programming and testing of trading systems using a successful battery of his own time-proven techniques. With this book, Pardo delivers important information to readers, from the design of workable trading strategies to measuring issues like profit and risk. Written in a straightforward and accessible style ,this detailed guide presents traders with a way to develop and verify their trading strategy no matter what form they are currently using stochastics , moving averages, chart patterns,RSI, or breakout methods. Whether a trader is seeking to enhance their profit or just getting started in testing, The Evaluationand Optimization of Trading Strategies offers practical instruction and expert advice on the development, evaluation, and application of winning mechanical trading systems.
From the Inside Flap
It would be an understatement to say that the world has changeddramatically in the sixteen years since the first edition ofDesign, Testing, and Optimization of Trading Systems waspublished in 1991. With all of the changes in communications,technology, and trading styles, a thorough and comprehensiveworking knowledge of how to properly design and test strategies hasnever been more important than it has become in today’s extremelycompetitive markets. Robert Pardo argues that a trading strategycan only be properly evaluated and successfully traded when profitand risk have been measured precisely and accurately—whichcan only be done through computerized testing. In this updated andrevised edition of his classic work, Pardo, a professional moneymanager and renowned expert in the design and testing of tradingstrategies and computerized trading applications, provides aclear-cut and specific road map for traders who want to transform atrading idea into a tested, verified, properly capitalized, andprofitable automated trading strategy.
Pardo shows that the benefits of correct testing andoptimization vastly outweigh the effort required to learn andmaster their proper application, and sets forth in detail thecorrect way to formulate, test, and evaluate a trading strategy. Heexplains how to properly optimize a trading strategy, incorporateout-of-sample data in the testing of a strategy, performWalk-Forward Analysis, develop a trading strategy profile, andjudge real-time trading performance with respect to the tradingstrategy profile developed via historical testing. In addition, heidentifies the symptoms of overfitting—optimizationthat has “gone bad” and resulting in false conclusions and offersguidelines to avoid it.
The trading game has never been as large or as lucrative as itis today. Nor have the markets ever been more efficient than theyare today. Yet traders the world over continue to make profits.Why? They have found an edge. For anyone planning to employalgorithmic or mechanical strategies in their trading, this bookpresents, in a straightforward and accessible style, the edge thatyou can use to obtain and enjoy the fruits of profitabletrading.
From the Back Cover
Praise For The Evaluation and Optimization of TradingStrategies, Second Edition
“The testing process is key to a profitable trading method andBob Pardo brings order and sanity to it. He shows the reader how tonavigate the minefield of optimization and offers walk-forwardtesting as a way to change a static system into a dynamicone.”
—Perry Kaufman, author of New Trading Systems andMethods, Fourth Edition
“Will your system work in the future? In this book Bob Pardoshows you exactly how to construct a trading system and then takethe most important walk of them all—the walk forwardtest—to find out if your system is really worth trading. Nowyou can know before you trade!”
—Larry Williams, author of Trading Stocks &Commodities with the Insiders: Secrets of the COT Report, andLong-Term Secrets to Short-Term Trading
“How to evaluate likely future trading system performance is notjust a question—it’s the question, and Pardo’s 1992Design, Testing, and Optimization of Trading Systems was amilestone work in the field. Now his approach has been updated andexpanded to reflect technological change as well as many insightsgained along the way. A must read for anyone who takes tradingseriously.”
—Bruce DeVault, President, Quantevo—AlgorithmicTrading Development
“Ask serious system developers for their recommended readinglist, and Bob Pardo’s book is likely to be among the firstmentioned. This book is the real deal; a serious work that seeks toteach you what to look for and what to avoid in your quest forworkable trading methodologies. Best of all, it helps you achievethe kind of objective, critical thinking necessary for mechanicaltrading success. Seekers of magical holy grails would be advised tolook elsewhere, but for earnest professional trading aspirants,this is a most rewarding read.”
—Art Collins, author of Beating the FinancialFutures Market: Combining Small Biases Into Powerful Money MakingStrategies
“This book is the definitive book on designing, testing, andusing trading systems. There is no better book on themarket.”
—Courtney Smith, Courtney Smith & Co., Inc.