Trading system analysis:Learning from perfection

摘要

For any series of price ticks in any market, there is a chain of actions that will generate the maximum profit (MP). A trading strategy that results in this is the maximum profit strategy (MPS) for any series of ticks. Studying these hypothetical systems can offer clues to building trading strategies for the real world. Indeed, signals can be used to establish actual positions (see "Idealized models for real profits," May 2008). Here, we'll examine parameters that can be used to better manage those positions. The measure of MPS performance is simple. If price fluctuations exceed transaction costs, then the MPS makes money. If price fluctuations don't exceed transaction costs, then the MPS does nothing and achieves zero profit/loss. Likewise, if costs equal zero, the MPS profit/loss equals the sum of the absolute value of every price change.