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

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CHAPTER 2
The Systematic Trading Edge
The New Oxford American Dictionary defines edge as “A quality or factor which gives superiority over close rivals” and strategy as “A plan of action or policy designed to achieve a major or overall aim,” and finally trade as “The action of buying or selling goods or services.”
In our definition of the word trade, let us replace “goods or services” with the purchase (going long) or sale (going short) of positions on financial markets operated under the auspices of an organized exchange such as the Chicago Mercantile Exchange (CME), EUREX, or the New York Stock Exchange.
Of course, it goes without saying that the goal or aim of trading is to cause our trading account to grow or to produce a profit.
Let us now combine and extend these definitions to define a trading strategy as “A plan of action designed to achieve a profitable return by going long or short in markets on organized financial exchanges.”
Continuing, our New Oxford American Dictionary defines systematic as “Done or acting according to a fixed plan or system; methodical.”
Let us combine these definitions to arrive at a definition of a systematic trading strategy as:
Acting methodically according to a fixed plan that is designed to achieve a profitable return by going long or short in markets on organized financial exchanges.
Let us recall from Chapter 1 that I take the terms systematic trading strategy and its short form, systematic trading, to mean, as in synonymous with, the following ...

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