Book Review: A Practical Guide to ETF Trading Systems
Regular readers of Scott’s Investments know that for the most part I am a fan of disciplined, systematic, and well-researched investing. Anthony Garner’s “A Practical Guide to ETF Trading Systems,” (Harriman House) details his approach to systemically trading exchange-traded funds. The primary system he uses is a trend following model with ETFs.
Garner’s primary methodology is to build mechanical systems using third-party software. He details in-depth his complete approach to rule-based trading, starting with his preferred software platforms all the way to two systems he argues beat buy-and-hold, both on a nominal and risk-adjusted basis. Garner provides insight into his data sources as well as several limitations and roadblocks a system developer may encounter when acquiring long-term market data.
Garner presents two systems, a bollinger band breakout system and a momentum system, that both beat buy-and-hold in his backtests. He uses as much historical data as possible, while acknowledging limitations in acquiring data for a several market indices. I give kudos to Garner for acknowledging the potential limitations in historical data so readers gain insight into the hurdles in developing their own system. The two systems Garner present have solid historical returns and, in theory, could be practically implemented by investors in their own investing.
There are some drawbacks to Garner’s presentation of his systems. For example, without a third party software platform similar to the one Garner uses (which has a subscription fee), an investor will have difficulty trading the system. The momentum system detailed by Garner is also very similar to some of the methods detailed by Mebane Faber in “The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets.” However, unlike Garner, Faber’s system requires no third party software platform and is much easier for the self-directed investor to digest. Also, Garner misses the mark by not presenting some of the additional data cited in his book on his own website. Instead, he refers readers to chat forums of his software provider. He missed a great opportunity to have real-time updates of his systems on a website or via a newsletter.
“A Practical Guide to ETF Trading Systems” reads more like a book on how to create mechanical trading systems using software. Garner presents plenty of data, which also makes the book an incredibly short read because many of the pages are charts and tables. The book, and systems presented, have practical potential for investors. However, Garner only gets readers to the tip of the iceberg, not giving us anything more than historical backtests on two trading systems. I think his systems can be better implemented using other sources and books due to Garner’s presentation of his systems and failure to follow-through with a website or other platform for updating readers real-time on trades within his two systems.
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