PART ONE
STRUCTURAL FOUNDATIONS FOR IMPROVING TECHNICAL
TRADING PERFORMANCE    1
Chapter 1
Introduction to Quantitative Trading: How Statistics Can Help Achieve
Trading Success 3
Trading Strategies and the Scientific Method    3
The Origins of This Book    5
New Markets and Methods of Trading    6
The Scientific Bent and Quantitative Trading    6
The Pioneers of Quantitative Trading: W. D. Gann, Richard Donchian,
Welles Wilder, Thomas DeMark    9
The Recent Explosion of Quantitative Trading    10
Today’s Quantitative Traders: Monroe Trout, John Henry, Ken Griffen,
Jim Simons    11
Why Quantitative Trading Is Successful    14
Birth of a New Discipline    21
Technology and Inefficiencies in Financial Markets    30
Merits and Limitations of Fundamental Analysis    33

Chapter 2
An Introduction to Statistics: Using Scientific Methods to Develop Cutting
Edge Trading Strategies 39
Measuring the Markets Using Statistics    39
Mean and Average of Returns and Prices    40
Measuring the Dispersion of Returns    40
Correlation    42
The Usefulness of the Normal Distribution    46
The Irregularity of Market Volatility    49
The Range of Volatilities    50
The Lognormality of Market Prices    53

......

Chapter 12
Solving the Trading Puzzle: Creating, Testing, and Evaluating a New
Trading Strategy 321
Creating the Strategy    321
Testing the New Strategy    324
Determining Optimal Leverage    325