PART TWO
TRADING SYSTEM DEVELOPMENT
In my opinion, coming up with a smart system idea to trade the markets is a little
like composing a new piece of music. To the untrained ear, it seems as if there are
only so many notes, tones, and octaves to go around, so that all their possible com-
binations should be exhausted by now. Similarly, to the untrained eye, there seem
only so many different short-term bar combinations on a chart and indicators to
combine them with. But even so, a lot of people are coming up with new music all
the time, just as a few market technicians have the ability to come up with new
short-term trading patterns.
Although most of the patterns and systems in this part are of my own creation,
the ideas behind them are not. In my former positions as a writer for Active Trader
magazine, and before that Futuresmagazine, I often found myself in a situation
where I had tons of good ideas presented to me, ready to run, with very little or no
additional effort on my part. Many of the systems here are the fruits of such ideas.
One of those who seems to come up with one great idea after another is
Michael Harris, who, in a couple of articles for Active Tradermagazine, present-
ed the Harris 3L-R pattern variation, featured in Chapter 14. Another never-end-
ing source for inspiration is Tom DeMark, who gave me the idea for the expert exit
system, featured in Chapter 15. The system presented there isn’t Tom’s, but the
idea for it came to me after having read his material and discussed a few concepts
with him.
Yet another great source for inspiration is my friend Mark Etzkorn, the edi-
tor-in-chief of Active Trader magazine. Mark is a swing-trading guy who came up
with the concepts and ideas behind the hybrid system in Chapter 8. And behind
Mark lurks Linda Bradford-Raschke, who most certainly has proved herself, bothCopyright 2003 by The McGraw-Hill Companies, Inc. Click Here for Terms of Use.