Discussion of article "Combinatorics and probability for trading (Part IV): Bernoulli Logic"
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New article Combinatorics and probability for trading (Part IV): Bernoulli Logic has been published:
In this article, I decided to highlight the well-known Bernoulli scheme and to show how it can be used to describe trading-related data arrays. All this will then be used to create a self-adapting trading system. We will also look for a more generic algorithm, a special case of which is the Bernoulli formula, and will find an application for it.
If we consider the analysis of the possibilities of describing trading history and backtests in the language of mathematics, first we need to understand the purpose and possible outcome of such analysis. Is there any added value in such an analysis? In fact, it is impossible to give a clear answer right away. But there is an answer, which can gradually lead to simple and working solutions. However, we should delve into more details first. Given the experience of previous articles, I was interested in the following questions:
The answers to all these questions are as follows. It is possible to reduce some strategies to fractal description. I have developed this algorithm and I will describe it further. It is suitable for other purposes as well, as it is a universal fractal. Now, let's think and try to answer the following question: What is the trading history in the language of random numbers and probability theory? The answer is simple: it is a set of isolated entities or vectors, the occurrence of which in a certain period of time has a certain probability and the time utilization factor. The main characteristic of each such entity is the probability of its occurrence. The time utilization factor is an auxiliary value that helps determine how much of the available time is being used for trading. The following figure may assist in understanding the idea:
Author: Evgeniy Ilin