October 3rd, 2016

Stock Trading Decisions

The HTML file below deals with the perception of trading decisions within the context of building a long term stock portfolio. It is the continuation of a series of articles dealing with the underlying math behind a stock trading strategy.

Instead of looking for a trading strategy that tries to shift its portfolio weighs from period to period as in a Markowitz or Sharpe rebalancing scenario, the search is for long term repeatable procedures that can affect a portfolio's payoff matrix over its entire multi-period multi-asset trading interval. The main interest is not on a trade here and there, but on the possible thousands and thousands of trades over a portfolio's lifespan. All influenced by the trading functions put on the table.

The HTML file below highlights the output of a trading strategy, and what should be done to improve upon it. It can be resumed in two charts:

   #1  Average Win Distribution
Average Win

(click to enlarge) 

   #2  Average Loss Distribution
Average Loss

(click to enlarge)

A trading strategy should have for objective to shift to the right the average profit per trade. Doing so will improve overall performance.

These articles are a lot more for my benefit than anything else. They serve as preparation to my game plan, to gain a better understanding of what I need to do. I don't want to just convert some of my existing trading strategies from one language to another. I want to do more, produce better overall programs and trading strategies. To go beyond what I have done before. Hope it can help others design their own better strategies based on these observations.

This document is being offered in HTML due to the many formulas. 

 

HTML file: Stock Trading Decisions

  ________

Related articles part of this series, as they were written: 

The Payoff Matrix 
The Game Inside 
Strategy Design Defects
Strategy Enhancers

Trade Dectection

 

To give you an idea of what is coming, see also the series: 

A Simple Stock Trading StrategyPart IPart II, and Part III. 


Created... October 3rd, 2016 © Guy R. Fleury. All rights reserved. 

Alpha Project