Book Review: Trading Systems Explained

If you are a big fan of technical analysis or if you are simply a normal trader who likes to hang on the internet for his/her money, you are in for a treat. Martin Pring has written a book which goes into the theory of how to build a mechanical trading system as close as one can get. In this 2009 book, the winner of the Trader’s Library Hall of Fame Lifetime Achievement Award sets on a journey to reveal the principles behind sustainable mechanical trading.

In other words, Martin Pring tries to explain to readers how you can build such a trading system and how to avoid the pitfalls where most of the beginner traders get lost.

The book is concise and logically organized. It starts with the guidelines for designing, testing and applying a trading system. Some of these are quite familiar to the experienced trader, yet they are put into perspective, which makes the learning experience easier.

I myself am quite fond of the old adage that a trader needs to be patient enough with the market to reap god profits. In other words, you need the discipline to constantly apply the trading system to the market and to resist your emotions which tell you sometimes to turn your back and run (id est cash your profits/losses and abandon the system). It might seem common sense to stick to a proven system, but in the heat of the market it is often an easy temptation to give up and to do foolish actions.

In this respect, the “Trading Systems Explained” book does a very good job in motivating the reader for a certain trading coolness. Which is absolutely necessary especially for the short term traders (those who do lots of transactions a day).

This is not to say that Martin Pring favors the daily traders against the longer terms. On the contrary, his research shows that the trading costs (which are an important profit-eating factor in the trading business) can eat up most, if not all of the profits if the trades are done too often. Again common sense, with the exception that here Martin Pring gives you some of the methods to minimize the costs in favor of your personal profits.

Don’t get fooled by the fact that the book has only 190 pages. Mr. Pring is actually quite a dense author – in the sense that I had to sometimes read some of the statements two or three times to get the meaning. This is also because Martin Pring is a pure technical analyst, a member of that breed who can think in charts and technical terms much better than in the earthy language of the common people. So this makes the things a little bit more difficult to understand. And also quite interesting, since he can convey a lot of information with a few words. To exemplify:

“A mechanical system will let profits run in the event there is a strong uptrend but limit the losses if a whipsaw signal occurs.”

Overall, “Trading Systems Explained” is a nice technical analysis book which goes beyond the theory in order to distill the author’s experience into easy-to-apply principles. Even if it is a little bit difficult to grasp at the first hand, I am convinced that at least you will leave the book with some reinforced principles, if not with some new trading ideas.

This book is available from Market Place Books.

Comments

[sticktoitiv...:]

A homemade quantfund, what could go wrong with that?

Jun 26 08:03 PM

[dcb:]

this is another cetin false advertising. Go away cetin find another place to troll you aren't welcome anymore. You keep changing the domain name attempting to fool people, but the same old ass is still running the site. Do you think it is really a good idea to continue to piss off hundreds of people every day with your constant trolling. don't you ever worry you'll run across someone somewhere and they will actually do something to you?

Why would the "third smartest man in the world", continue to put his health in danger?


On Jun 26 07:04 PM money hardball wrote:

> Goldman and Bank of America run the markets along with Geithner,
> and beagle boy Ben. There is no free markets, only welfare capitalism
> and socialism for capitalism.
>
> hat tip to investmintideas.blogsp.../ for the good articles
>
>
>
> To stop the New World Order I implore people to save more money.
> Stop spending in order to make the economy shrink. If consumers de-leverage,
> so will these financial firms, too. Their grip on society is lessened
> when we stop playing into their debt/consumption trap.

Jun 27 07:28 AM

[MadScientist:]

Like many here, I am getting really tired of seeing the same generic posts in multiple threads - unrelated to the topic at hand, such as the one above - that do nothing more than pimp a web site.

Please respect others here and stop doing this.

Jun 27 09:45 AM

[MadScientist:]

As to the topic at hand, I'll check out his book. Always a good thing to expand one's knowledge on TA, since this is my preferred way of trading.

Thanks!

Jun 27 09:47 AM

[FloridaBoy2:]

I'm not speaking about this site but there is so much mis-information
posted on the web regarding investing that a mechanical/technical/s... approach to trading makes dollars and sense. Especially in choppy markets.

Jun 28 05:44 AM

[linenoise:]

To those interested in the book (the subject of the article), it can be found for under twenty bucks (not 45 as on amazon).

www.bestwebbuys.com/bo...

Jun 28 11:07 AM

[Radu Haraga:]

Hi there, thank you for the comments (except for the spam, of course, maybe the seekingalpha editors find a way to stop this meaningless polution). I found the book easy to read and quite interested as a technical, graph-based analysis method. It can also give you a false illusion that you can replicate the author's method safely... which does not happen. So "proceed wtih caution" :)

Jul 20 07:30 AM