Formulas for gains and losses in trend following strategy

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.

Formulas for inverting the position in trend following strategy

The system discussed in the previous post can be easily tested using the simulation method of its operation. The input record format will be an Open-High-Low-Close, and I plan to implement the engine of the system using C++ compiler together with the R environment. But first I would like to briefly write down the formulas necessary to program rules of position reversals and the resulting profits.

Elementary trend following trading system

I want to go as soon as possible to the specific methods and algorithms, which is why today I present the basic concept of the base system. With such systems, like building blocks, I'll build more complex structures. Among other things, through the use of hierarchical stacking one on the other systems. But more on that later, for now I want to describe the basics of my methodology.

The diversification of parameters. The portfolio of strategies.

The activities on derivatives market, especially on Forex, are associated with risk. The risk that is inherent in any operation we do. Of course, we try to minimize them, at least to control, maintain an acceptable, a predetermined level. One of the tools we use for this purpose is broadly defined, diversification.

Introduction to Blog

Hello to all readers!

This is the introduction to a series of texts, which I plan to write, devoted to mathematics and financial engineering. Keywords in the title and subtitle of the blog show that I am interested in operations on the futures markets and Forex. What's more, my main goal is to develop mechanical trading systems and study their properties using simulation methods.