Intelligent Trading Systems

In ‘Intelligent Trading Systems’ (subtitled ‘Applying Artificial Intelligence to Financial Markets’), Martinsky investigates crowd behaviour, and explains how a range of technical analysis tools can be implemented in a trading system.

The author first explains various theories of how markets work, including chaos theory, the Efficient Market Hypothesis, and other issues associated with crowd behaviour. Martinsky then introduces some technical analysis theories, such as Elliott Wave and Fibonacci theory, as well as a range of indicators including moving averages, MACD and oscillators, explaining how he believes they apply to financial markets.

The next part of the book discusses how markets and exchanges operate in terms of the way orders are input, matched and cleared. Many books on similar themes omit this background information, probably because the authors believe it is too basic. However, I do not think that is always the case and certainly new traders who are looking to incorporate the ideas in this book are better off for having this section included.

For the rest of the book, Martinsky explains how to backtest and simulate trading strategies based on the ideas that he presented earlier. He includes sections on system optimisation, which is mathematical in nature.

‘Intelligent Trading Systems’ is a good read for mathematically inclined traders who are seeking to understand both crowd behaviour and how to incorporate some theories of technical analysis into a software-based trading system.