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The Evaluation and Optimization of Trading Strategies, 2nd Edition by Robert Pardo

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CHAPTER 1
On Trading Strategies
Trading strategies have been around for as long as people have traded organized markets. Whereas some might quarrel with me in this usage I will state unequivocally that by the terms automated trading strategy and its short form automated strategy, I mean all of the following terms: trading systems, mechanical trading systems, trading model, and algorithmic trading.
In the final analysis, I believe that any successful trader, discretionary or automated, does trade with a systematic trading strategy. In the end, as I think you will see if you work through this book, it is difficult to generate long-term and above-average trading or investment returns without a systematic approach.
Interest in technical methods and trading strategies tends to wax and wane with interest in the markets themselves. Interest in the markets tends to wax and wane with the dynamism of the markets and with the attendant opportunity, or lack thereof, for trading profits.
In the 10 years before the first edition of this book, The Design, Testing, and Optimization of Trading Systems (DTOTS) published by John Wiley & Sons in 1991, interest in trading systems enjoyed tremendous growth. This was due to two main developments.
The first development was the growth in the markets themselves. Not only did a major bull market develop in equities, but the 1980s led to the introduction and development of a number of new futures markets too numerous to mention. The bulk of this new growth ...

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