In
the previous post I presented the rules that govern changes
in the market by the player applying the strategy to follow the
trend. Now I want to go to the formulas determining gains and losses
arising from the position occupied by the player. Of course, this
applies to profits from the basic strategy, as there is always the
assumption operate on a fixed and unchanging position size.

Recall
that the rules of reversing positions are based on the criterion of
exceeding a specified level. This level is denoted by the letter "t"
and is a parameter of the method. Its value will be determined at a
later stage on the basis of empirical optimization using appropriate
criterion functions. Similarly, the rules which govern the settlement
position will take the form of a conditional. Conditions are: the
position at the beginning of the time interval, the relationship
between the minority or the majority of the relevant course extreme
(maximum or minimum) and the threshold value, which is equal to Open
quotation with added or subtracted value of the parameter "t".

Formulas
are expressed by differences between corresponding values of opening
and closing rates as well as the values of the levels of reverse in
cases where the reversal took place.

This
model enables efficient simulation has the system. We must of course
remember that the parameter "t" is determined arbitrarily.
We can eliminate this problem by optimizing it on the collection of
the results of the system in time intervals preceding the current
interval. For this purpose one can use various functions of the
criterion. This leads to the concept of a system of hierarchical
structure, where the results of the auxiliary systems are used for
determining the parameters of the target system to be the real
operation on the market.

This
is precisely the concept of the system I will present in the next
post.

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