Trading Books: ‘Mechanical Trading Systems’ By Richard L. Weissman

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First published in 2004 by John Wiley & Sons, Mechanical Trading Systems by Richard L. Weissman quickly became an essential read for systematic traders looking to remove emotional bias from their trading decisions. Weissman, a veteran trader with over 25 years of experience, shares his approach to building mechanical systems that cater to both novice and seasoned traders. This book is invaluable for anyone serious about transitioning from discretionary to rules-based trading. Weissman’s approach emphasizes discipline, proper risk management, and statistical analysis—skills vital to thriving in the volatility of today’s markets.

Mechanical trading systems - richard l weissman

Richard L. Weissman Background

Richard L. Weissman is a professional trader, educator, and author with over two decades of trading experience. Known for his systematic approach to the financial markets, Weissman’s expertise spans various asset classes, including futures and equities. His deep understanding of technical analysis and risk management has solidified his reputation as a trusted figure in the trading community. By applying his extensive knowledge in Mechanical Trading Systems, Weissman guides traders through the process of eliminating emotion-driven decisions, focusing instead on proven mechanical strategies.

Summary of Mechanical Trading Systems

Weissman’s book is divided into several insightful sections, each addressing a core component of mechanical trading. Key topics covered include:

  • Building and Optimizing Trading Systems: Guidance on how to develop rules-based systems.
  • Risk Management: Emphasizing capital preservation through position sizing and stop-loss strategies.
  • Backtesting: Step-by-step instructions on how to test strategies across historical data.
  • Diversification: Techniques to reduce portfolio risk by incorporating multiple systems and markets.
  • Psychological Discipline: The mental side of following systems through various market conditions.

Key Concepts and Strategies

Weissman’s core argument in Mechanical Trading Systems is simple yet profound: trading should be systematic and devoid of emotion. His strategies highlight several key concepts:

  • Trend Following and Mean Reversion: The book focuses heavily on trend-following systems, which aim to capitalize on long-term market movements, and mean-reversion strategies, which exploit short-term market overreactions.
  • Position Sizing and Risk Management: Weissman emphasizes how appropriate position sizing and risk control can protect traders from large drawdowns.
  • Backtesting: He provides detailed guidelines for backtesting systems to ensure they work across various market conditions, giving traders the confidence to trust their strategies.

By mastering these concepts, traders can minimize emotional biases, build confidence, and stick to their strategies during market fluctuations.

Practical Applications

Weissman offers a wealth of actionable advice that traders can implement immediately. He details methods for:

  • Backtesting Systems: He stresses the importance of running simulations to see how a trading system would have performed under historical conditions, helping traders avoid common pitfalls.
  • Position Sizing: His guidelines on position sizing ensure that traders don’t risk too much capital on any single trade.
  • Diversification: Weissman explains how combining different trading systems can lower overall risk, even if individual strategies might have different strengths and weaknesses.

One particularly practical example is how Weissman applies moving averages to identify market trends, combined with volatility filters to avoid false signals.

Powerful Trading Quotes from Mechanical Trading Systems

"Trading based on a fixed set of rules allows for the elimination of emotion from the decision-making process, one of the greatest obstacles to consistent profitability."

"The key to long-term success is risk management, not forecasting market direction."

"A good system doesn’t predict the future. Instead, it prepares you to act on whatever the market presents."

Personal Insights from Richard L. Weissman

Weissman’s personal anecdotes throughout the book enrich the learning experience. For example, he shares stories of his early trading failures, which led him to adopt a more disciplined, systematic approach. These stories provide inspiration and motivation, showing readers that even seasoned traders have faced struggles but overcame them through discipline and system-based trading.

Conclusion

Mechanical Trading Systems is an essential read for both beginners and seasoned traders interested in removing the uncertainty and emotion from their trading decisions. The book combines theoretical insight with practical, actionable strategies that traders can start implementing immediately. With its focus on risk management, backtesting, and diversification, this book is particularly valuable for those pursuing systematic or algorithmic trading. If you’re a trader—whether technical, fundamental, or systematic—seeking long-term success, Weissman’s methods provide a clear, structured pathway to consistency and profitability.

For those looking to expand their understanding of trading and improve their strategies, this book is a must-read. Buy it now on Amazon.

Other Great Trading Books

There are many great trading books which will help you accelerate your trading career. The following are books that we have reviewed and consider valuable additions to any systematic trader’s library.

Systematic Trading Books

General Trading Books

Risk Management Trading Books

Technical Analysis Trading Books

Fundamental Investing Trading Books

Psychology Trading Books

Amibroker Trading Books

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Adrian Reid Founder and CEO
Adrian is a full-time private trader based in Australia and also the Founder and Trading Coach at Enlightened Stock Trading, which focuses on educating and supporting traders on their journey to profitable systems trading. Following his successful adoption of systematic trading which generated him hundreds of thousands of dollars a year using just 30 minutes a day to manage his system trading workflow, Adrian made the easy decision to leave his professional work in the corporate world in 2012. Adrian trades long/short across US, Australian and international stock markets and the cryptocurrency markets. His trading systems are now fully automated and have consistently outperformed international share markets with dramatically reduced risk over the past 20+ years. Adrian focuses on building portfolios of profitable, stable and robust long term trading systems to beat market returns with high risk adjusted returns. Adrian teaches traders from all over the world how to get profitable, confident and consistent by trading systematically and backtesting their own trading systems. He helps profitable traders grow and smooth returns by implementing a portfolio of trading systems to make money from different markets and market conditions.
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