Beyond Technical Analysis
,Beyond Technical Analysis:
How to Develop and
Implement a Winning
Trading System
Tushar S. Chande, PhD
John Wiley 61 Sons, Inc. New
York • Chichester • Brisbane •
Toronto • Singapore • Weinheim
,This text is printed on acid-free paper.
Copyright © 1997 by Tushar S.
Chande. Published by John Wiley &
Sons, Inc.
Data Scrambling is a trademark of Tushar S. Chande.
TradeStadon, System Writer Plus, and Power Editor are trademarks of
Omega Research, Inc.
Excel is a registered trademark of Microsoft Corporation.
Continuous Contractor is a trademark of TechTools, Inc.
Portfolio Analyzer is a trademark of Tom Berry.
All rights reserved. Printed simultaneously in Canada.
Reproduction or translation of any part of this work beyond that permitted
by Section 107 or 108 of the 1976 United States Copyright Act without
the permission of the copyright holder is unlawful. Requests for
permission or further information should be addressed to the Permissions
Department of John Wiley & Sons.
This publication is designed to provide accurate and authoritative
information in regard to the subject matter covered. It is sold with the
understanding that the publisher is not engaged in rendering legal,
accounting, or other professional services. If legal advice or other expert
assistance is required, the services of a competent professional person
should be sought.
Library of Congress Cataloging in Publicaton Data:
Chande, Tushar S., 1958-
Beyond technical analysis : how to develop & implement a winning
trading system / Tushar S. Chande.
Includes index.
ISBN 0-471-16188-8 (cloth : alk. paper)
1. Investment analysis. I. Tide. II. Series. HG4529.C488 1997 332.6
—dc20 96-34436
Printed in the United States of
America 10 98765432
, Contents
Preface xi
Acknowledgments xiii
1 Developing and Implementing
Trading Systems 1
Introduction 1
The Usual Disclaimer 3
What Is a Trading System? 3
Comparison: Discretionary versus Mechanical
System Trader 4
Why Should You Use a Trading System? 5
Robust Trading Systems: TOPS COLA 6 How
Do You Implement a Trading System? 7 Who
Wins? Who Loses? 8 Beyond Technical
Analysis 9
2 Principles of Trading System Design 11
Introduction 11
What Are Your Trading Beliefs? 12
Six Cardinal Rules 14
Rule 1: Positive Expectation 15
Rule 2: A Small Number of Rules 17
,Beyond Technical Analysis:
How to Develop and
Implement a Winning
Trading System
Tushar S. Chande, PhD
John Wiley 61 Sons, Inc. New
York • Chichester • Brisbane •
Toronto • Singapore • Weinheim
,This text is printed on acid-free paper.
Copyright © 1997 by Tushar S.
Chande. Published by John Wiley &
Sons, Inc.
Data Scrambling is a trademark of Tushar S. Chande.
TradeStadon, System Writer Plus, and Power Editor are trademarks of
Omega Research, Inc.
Excel is a registered trademark of Microsoft Corporation.
Continuous Contractor is a trademark of TechTools, Inc.
Portfolio Analyzer is a trademark of Tom Berry.
All rights reserved. Printed simultaneously in Canada.
Reproduction or translation of any part of this work beyond that permitted
by Section 107 or 108 of the 1976 United States Copyright Act without
the permission of the copyright holder is unlawful. Requests for
permission or further information should be addressed to the Permissions
Department of John Wiley & Sons.
This publication is designed to provide accurate and authoritative
information in regard to the subject matter covered. It is sold with the
understanding that the publisher is not engaged in rendering legal,
accounting, or other professional services. If legal advice or other expert
assistance is required, the services of a competent professional person
should be sought.
Library of Congress Cataloging in Publicaton Data:
Chande, Tushar S., 1958-
Beyond technical analysis : how to develop & implement a winning
trading system / Tushar S. Chande.
Includes index.
ISBN 0-471-16188-8 (cloth : alk. paper)
1. Investment analysis. I. Tide. II. Series. HG4529.C488 1997 332.6
—dc20 96-34436
Printed in the United States of
America 10 98765432
, Contents
Preface xi
Acknowledgments xiii
1 Developing and Implementing
Trading Systems 1
Introduction 1
The Usual Disclaimer 3
What Is a Trading System? 3
Comparison: Discretionary versus Mechanical
System Trader 4
Why Should You Use a Trading System? 5
Robust Trading Systems: TOPS COLA 6 How
Do You Implement a Trading System? 7 Who
Wins? Who Loses? 8 Beyond Technical
Analysis 9
2 Principles of Trading System Design 11
Introduction 11
What Are Your Trading Beliefs? 12
Six Cardinal Rules 14
Rule 1: Positive Expectation 15
Rule 2: A Small Number of Rules 17
