From a leading trading systems developer, how to make profitable trades when there are no obvious trends How does a trader find alpha when markets make no sense, when price shocks cause diversification to fail, and when it seems impossible to hedge? What strategies should traders, long conditioned to trend trading, deploy? In Alpha Trading: Profitable Strategies That Remove Directional Risk, author Perry Kaufman presents strategies and systems for profitably trading in directionless markets and in those experiencing constant price shocks. The book Details how to exploit new highs and lows Describes how to hedge primary risk components, find robustness, and craft a diversification program Other titles by Kaufman: New Trading Systems and Methods, 4th Edition and A Short Course in Technical Trading, both by Wiley Given Kaufman's 30 years of experience trading in almost every kind of market, his Alpha Trading will be a welcome addition to the trading literature of professional and serious individual traders for years to come.

From a leading trading systems developer, how to make profitabletrades when there are no obvious trendsHow does a trader find alpha when markets make no sense, whenprice shocks cause diversification to fail, and when it seemsimpossible to hedge? What strategies should traders, longconditioned to trend trading, deploy? In Alpha Trading:Profitable Strategies That Remove Directional Risk, authorPerry Kaufman presents strategies and systems for profitablytrading in directionless markets and in those experiencing constantprice shocks. The book* Details how to exploit new highs and lows* Describes how to hedge primary risk components, findrobustness, and craft a diversification program* Other titles by Kaufman: New Trading Systems and Methods4th Edition and A Short Course in Technical Tradingboth by WileyGiven Kaufman's 30 years of experience trading in almost everykind of market, his Alpha Trading will be a welcome additionto the trading literature of professional and serious individualtraders for years to come.

Preface ixChapter 1 Uncertainty 1Impact on Trading 2The Inevitable Price Shocks 3Why So Much about Price Shocks? 9Complexity and Contagion Risk 10The Ugly Side 11Taking Defensive Action 11Accepting Performance for What it is 13Chapter 2 The Importance of Price Noise 15Noise Explained 15Different Markets 19A Closer Look at Equity Index Markets 21Importance of Noise 22Determining the Strategy 25Capitalizing on the Trend of Noise 29Chapter 3 Pairs Trading: Understanding the Process 31The Process 32The Basics 32Target Volatility 54Home Builders 65Using ETFs 78Portfolio of Home Builder Pairs 84Execution and the Part-Time Trader 89Stop-Losses 89Trading Intraday 90Key Points to Remember 90Chapter 4 Pairs Trading Using Futures 93Futures 94Mechanics of a Pairs Trade in Futures 97Inflation Scares 100Trading Energy Pairs 102Revisiting Momentum with Energy Markets 105A Miniportfolio of Natural Gas Pairs 112The Inflation Pairs: Crude, the EURUSD, and Gold 119Equity Index Pairs 128Leveraging with Futures 138London Metals Exchange Pairs 141Volatility Filters 153Interest Rate Futures 154Summary 154Chapter 5 Risk-Adjusted Spreads 155Dell and Hewlett-Packard 155Trading Both Long-Term (Hedged) Trends and Short-Term Mean Reversion 159Gold, Platinum, and Silver 161The Platinum/Gold Ratio 163Implied Yield 170The Yield Curve 174Trend Trading of London Metal Exchange Pairs 179Summary 184Chapter 6 Cross-Market Trading and the Stress Indicator 187The Crossover Trade 188The Stress Indicator 189Gold, Copper, and Platinum 195Mining Companies 198Agribusiness Pairs 206The Major Energy Producers 208Portfolio of Cross-Market Energy Pairs 220Other Opportunities 226Some Final Notes 228Chapter 7 Revisiting Pairs Using the Stress Indicator 229Futures Markets and the Stress Indicator 229Equity Index Futures 230Interest Rate Futures 238The Portfolio Spreadsheet 245Summary of Pairs Trading 248Chapter 8 Traditional Market-Neutral Trading 249Home Builders 250Trend or Mean Reversion? 250Basic Market-Neutral Concept 251Volatility-Adjusting the Position Size 264Arbing the Dow: A Large-Scale Program 267Thoughts about Market-Neutral Trend Following 274Market Neutral Using Futures 274Market-Neutral Comments 277Chapter 9 Other Stat-Arb Methods 281Trade-Offs 282System Briefs 282New Highs and New Lows 290Merger Arb 290Creating Your Own Index Arbitrage 292Arbing the Dow 301Arbing the S&P 500--Index Arbitrage 302About the Companion Web Site 305About the Author 306Index 307