Building Trading Systems

Trading Systems and Methods, 6th Edition, Perry J. Kaufman
The Bible of system traders. A classic that’s been around since 1978 and is still being updated. A general survey of all aspects of systems trading.

Building Winning Algorithmic Trading Systems, Kevin J. Davey
His personal methodology for developing systems. Takes us through the complete process and covers all the critical parts of developing small-scale systems, which includes much more than the trading strategy. Has good advice on backtesting.

Advances in Financial Machine Learning, Marcos Lopez de Prado
Whereas Davey’s approach is small-scale, Prado writes about building larger-scale systems using big data, for example. But he covers essential areas of systems trading with a fresh and realistic perspective that will be useful, even to traders building smaller-scale systems. Includes a section on how to avoid pitfalls in backtesting.

Quantitative Trading, Ernest P. Chan
This book is similar to the Kevin Davey book, but written by a quant. Chan paints broad strokes in discussing many of the facets of running a small-scale automated operation.

Professional Automated Trading: Theory and Practice, Eugene A. Durenard
Durenard explains how he develops medium-scale adaptive systems using LISP. Plenty of examples of code. Good concepts by a real practitioner.

Trend Following, 5th Edition: How to Make a Fortune in Bull, Bear and Black Swan Markets, Michael Covel
This book is essentially 3 books in one, it has interviews with many of the greatest traders, evidence based arguments for using trend following, and the facets of system trading. Spoiler alert: If you are looking for the holy grail the author does not include it.

Trading techniques and indicators usable in automated trading

New Concepts in Technical Trading Systems, J. Welles Wilder Jr.
Curiously published in 1978, the same year as Kaufman’s Trading Systems and Methods, this seminal piece has also become a classic, with many of the indicators presented in here for the first time becoming household names: RSI, ATR, DI, ADX and Parabolic SAR. A brilliant book and an intimate journey into Wilder’s original thinking process. He has a knack for keeping calculations simple, yet aiming at the jugular, masterfully capturing the essence of whatever he sets his sights on measuring.

Volume Price Analysis Across The Markets: 4 Books Box Set, Anna Coulling
Contains great information on how to interpret and use volume for an edge in price action trading. Explains how to spot and utilize the actions of Market Makers.

YTC Price Action Trader, Lance Beggs
All around book describing how to read market moves. Apart from other popular techniques like SR, etc, Beggs explains the concepts of strength & weakness and candle sentiment analysis. Laid out in a way, which can be coded into trading system. As an example, this is a script covering candle sentiment.


Incerto Series, Nassim Nicholas Taleb
An illuminating journey into opacity, uncertainty, randomness, and our general ignorance or misconceptions surrounding them. A humbling study of our shortcomings in appraising the past, present and future. The stimulating and funny work of an unashamedly radical thinker who, after making piles of “fuck you money”, decided to take some time off from trading to walk slowly and rethink large parts of what we consider to be knowledge—and what is knowable.

Thinking, Fast and Slow, Daniel Kahneman
A brilliant and gentle mind’s overview of research in cognitive psychology, by himself and many others. Kahneman explores why we think what we think, see what we see, and why we sometimes get it right, and sometimes get it all wrong. Kahneman also makes a diligent effort to illustrate the impact of how our brain works—or tries to work—in different areas of our life: social, economic and political. Fascinating.

The Disciplined Trader: Developing Winning Attitudes, Mark Douglas
An oft-vehiculated myth about automated trading is that it takes emotions out of the picture. Reality is different. Unchecked emotions and counterproductive thoughts can prevent you from modeling or adequately managing trading systems. This book focuses on the mental processes that can impact your trading. Douglas doesn’t mention automated trading at all, and goes whole chapters at a time without even mentioning trading, but his book takes you on an introspective journey that has good probabilities of changing you for the best.

Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, Annie Duke
An ex-poker player and psychologist has a look at how to improve our thinking in situations where we don’t have perfect information but still need to make decisions. She explores our learning process and how we can better distinguish between the quality of outcomes and the quality of our decisions, which because of randomness often cannot be linked.