Howard Bandy & trading

[loop101]

I use to trade stocks, options, and forex as an amateur, but I quit after losing my account during the 2008 crisis. After that, I decided I would rather bet on myself than commodities. My approach to trading involved using self-learning systems to find repeating patterns in the markets, but I was not very focused on money management - which turns out to be a lot more important than knowing which way a commodity will go. I did discover a retired 'quant' named "Howard Bandy", who has been writing books about developing trading systems (using Amibroker of all things). If you are looking for a math-centric approach to trading, I would suggest you look at his material. If you are trading, you should be using a "system", that covers every eventuality. You should also be able to tell if your system is not performing as expected, so you know when to not trust it. Bandy covers all of that (though it's not simple!).

I hate to sound negative about trading, but if you plan to trade significant amounts of real money, there are a ton of things you need to know about, much more than you will read in any one book. Little guys (like I was) are like the plankton eaten by the whales. If you want to know how screwed up the markets currently are, listen to youtube broadcasts by retired trader Max Keiser. I urge people to avoid trading unless they are committed to learning how to have the best chance of surviving it. If you can play the game, and not get totally wiped out, you will probably make money.

One more thing about trading, there are basically two ways to trade. The first is to take a lot of little losses, and hope for a big win. The second is to take a lot of little wins, and hope you don't take a big loss. Trend followers use the first method, and range traders use the second method. Books like "High Probability ETF Trading" use the second method. You can't trade without taking losses, so your approach has to account for them.

 

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[damienlee]

I totally agree. One thing I'd like to add is that trend trading tends to require a larger account, because it will likely be taking a number of hits before a big trend comes along. You need to survive long enough to reap the benefits.

 

[jverb]

Hey Loop101,

I purchased Howard Bandy's books a few weeks ago, and I am working through all of the code. This guy is just amazing! I am really impressed with Bandy's ideas and execution. I wasn't crazy about AmiBroker, but I bought a copy just so I could work through the code examples easily. Now I'm a fan of AmiBroker too.

Did you get AmiBroker? What's your platform of choice? I've been on Metatrader, but I find I like programming AmiBroker better.

Thanks for your note about Bandy. More people need to hear about him.

John

 

[jverb]

Also, what do you trade? I've just been trading EUR/USD lately.

 

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[Alex Barboza]

Is his material suitable for complete newbies? do you recommend something else? I'm particularly interested in the Forex market?

 

[loop101]

Also, what do you trade? I've just been trading EUR/USD lately.

I'm not currently trading, when I was, I was doing carry-trades. There was a guy named "FxNightTrader" on the Oanda forum that had a simple system which performed well. The only way it could go bust, would be if banks stopped lending money. Which is what happened during the 2008 crisis.

A few months ago I started tinkering with a "strength" system, which I think I wrote about on this forum. Things got busy at my dayjob, so I stopped following it. Basically, the idea was to compare all the pairs against each other, to determine the individual "strength" of a single currency, like the USD. So, if EUR/USD went "up" during the week, the EUR would get a +1, and the USD would get a -1. If the USD/JPY went up, the USD would get +1 (now flat at 0), and the JPY would get -1. If you have a balanced portfolio of pairs (balanced against each other), you should be able to determine the strongest and weakest currencies. Then you should be able to make the appropriate bet. "Appropriate" is of course subjective, and it comes back to whether you think a rising currency will continue to rise (trend trading) or revert to a mean (swing trading). My accumulating +1 and -1 was meant to work like William O'Neils method of detecting market tops and bottoms (summing recent Follow Through Days).

When I say "balanced", I mean something simple like: EUR/USD, USD/JPY, EUR/JPY. In that example, each currency would oscillate between -2 and +2. Or a larger portfolio like: EUR/USD, USD/JPY, EUR/JPY, EUR/CHF, USD/CHF, CHF/JPY, would give ranges from -3 to +3.

If EUR beat USD,JPY, and CHF it would be +3. If CHF lost against EUR, USD, and CHF it would be -3. So the right bet would be that EUR/CHF would go up. If there was no +3 or -3 currencies, you might elect not trade the following week. Any good system should have a way to sit out of the market.

My personal feelings about trading right now, is that the markets are too manipulated to trade them. I'm expecting an eventual financial collapse, but the governments seem to be able to keep the plates spinning month-by-month. I'm not going to place a bet on a collapse happening, but I am not going to participate in the markets. A friend of mine ran a $100M trading fund, and he got out for the same reason.

Bandy is great, he is that rare gem that is an absolute master of his craft, and spends his golden years trying to pass on what he knows.

 

[loop101]

Is his material suitable for complete newbies? do you recommend something else? I'm particularly interested in the Forex market?

Bandy's material is aimed at people who know (or want to learn) how to develop automated trading systems. he uses Amibroker in his examples, because it is cheap and easily affordable for most traders.

If you ever plan to be a serious trader, I think you should at least have read his books - just so you know what the experts are doing. They will be the ones trying take your money. I downloaded a copy of his book, which was of questionable legal origin, and was so impressed I bought his physical books (which were the latest editions).

If you want to play around with Forex, you can open an Oanda account with about $100. Visit a site like BabyPips or Oanda's forums to read what other people are doing. Make tiny bets of like $1 or $2, and have a lot of fun experimenting and learning.

 

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[loop101]

Did you get AmiBroker? What's your platform of choice? I've been on Metatrader, but I find I like programming AmiBroker better.

I got AmiBroker, and it was OK. I prefer writing my own programs in C or Ruby, but data sources are expensive for an amateur like me. I mostly liked AmiBroker visualization tools, and I think it had an integrated datasource (North-something from Australia, recommended by Bandy). At one point, I was updating the data through AmiBroker, then trying to export it as ASCII for my own apps. It was a big mess. I bought some historical data from is99 to train systems on (a good source for cheap data).

I like a book called "High Probability ETF Trading", and was surprised to see Bandy gave it a good recommendation on Amazon: "This is solid research, resulting in clearly defined, stable, profitable systems. Whether you plan to trade these as they stand, or use them as ideas to add to your own systems, you should know about them. You should have this book in your library."

 

[loop101]

Is his material suitable for complete newbies? do you recommend something else? I'm particularly interested in the Forex market?

If you are a complete newby, I would suggest starting with 2 books that Bandy himself recommended:
High Probability ETF Trading: 7 Professional Strategies To Improve Your ETF Trading
Short Term Trading Strategies That Work

These books have very simple systems that were developed and tested by people with lots of experience.

 

[Alex Barboza]

Thank you both for your suggestions. I want to learn more about the markets and hopefully someday, when I set my money system, start trading.

 

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[jverb]

Hey loop101,

I like the idea of that strength system. It sounds a little bit like arbitration, but instead of trying to exploit differences between pairs in real time, you're using bigger picture differences.

It would be very interesting to see an automated system using that method.

Thanks for the book tip too; if Bandy recommends it, it must be good.

I wish Bandy wouldn't take so long between books!

jv

 

[loop101]

I didn't even realize Bandy released a new book this year, so I just ordered it. I will post my thoughts on it. I also sent another $1k to my forex account, to put in to a sub-account. That way, I will have two separate $1k accounts for testing.

Bandy's new book:

Mean Reversion Trading Systems — Home Page

 

[jverb]

Hey Loop101,

Howard Bandy is giving a free Webinar next week. If you're interested you can sign up here:

Free Webinar: The Role of Backtesting in Trading System Development by Dr. Bandy - Technical Securities Analysts Association - San Francisco (San Francisco, CA) - Meetup

Later,

john

 

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[richardlearn]

Some great insight here thanks. 90% of my trades are reversion to mean, I agree with the sentiment that the markets are too difficult for retail traders. I realized a 100% gain early in the year (through) March and by May the methodologies no longer held true. I am currently looking at revisions to my trade plans to re-engage profitably. It's important to me to stay in the markets, especially now, education is expensive.

 

[loop101]

Howard's latest book was released yesterday

http://www.amazon.com/dp/0979183855/?tag=tff-amazonparser-20

 

[Alleex_a]

I'm writing free courses about trading and technical analysis on my blog. I learnt through books and personnal experience.. (Better than $$ ebooks or expensive courses...)

www.a2xtrading.wordpress.com

 

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