Tuesday, April 2, 2013

XJO Quant - Quant Trading Strategy Ebook on ASX200


Summary
  • An honest, and unique trading playbook written by Australian Author.
  • Electronic - pdf format.
  • Quant analysis based on the ASX200 index, price action.  Not technical analysis.
  • Short term strategies, with comprehensive backtesting on yahoo data series.
  • Very specific style of trading, whilst the quant theory is elegant and simple, the execution requires a good understanding of market structure and the costs associated with short term trading.
  • Author's style reminds me of a self taught trader, and this genuine style may be refreshing for readers looking for a unique view for newcomers to the market.
  • These trades would most likely be executed using CFDs or Futures and the costs of trading them would need to be considered 
  • Any daytrader trading the ASX200: this book should be mandatory reading, regardless of the trader's style.
Book Points
  • A few trading rules and words of advice
  • Trades on pivot points, seasonality, range breakout, other short term patterns
  • The entry and exit rules are clearly defined, some a 1 day holding periods, some a a few days, but generally short term trading.
  • The backtest dates are for the past 10 years

Points to Consider
  • There are backtesting for 10 years, and the number of trades for these strategies on the first two chapters pivots and seasonals over the period can be 10 - 110 (out of approximately 2500 trading days); which is not a lot per trade strategy.  The large number of strategies means that you would have to find a way of referencing these trades quickly regarding to the market conditions.  Knowing which strategies are 'live' would be of value.  I couldn't imagine flicking 200 pages to try to figure out what trade is live every week/day.
  • The number of trades in the breakouts sections of the book is a lot larger - sometimes upto 135 - 1118 trades: however the profit factor on these trades are lower; which is to be expected.  Risk management would be a lot more crucial on these trades.
Conclusions
The book is a great attempt and systematic approach to trading one instrument index, the asx200, XJO.  For the past 10 years of researching Australian equities, I have not yet read a book that does such a comprehensive coverage on all the potential profitable short term strategies based on historical backtesting on this index.  
However, trading on past price action has its limitations and hazards - that the future may not repeat itself.  The opening of blackbox strategies to the hands of a discretionary trader also has it's temptations and flaws - it only takes one leveraged trade in CFDs to blow out your account.  I make this point, because to overcome trading costs, you are most likely going to trade CFDs or futures, both of which are leveraged instruments.  If you can understand this component of risk management, then this is definitely a book worth incorporating into a short term trader's arsenal.

The Cost of the book is AUD$99.00 and can be downloaded at http://asxiq.com/blog/xjo-quant-high-probability-trading-setups-on-asx-200-index/ with the promo code "plus5000" to get 25% off.  I receive no share of any earnings on this book.