Discussion in 'Strategy Development' started by nfactorial, Apr 26, 2010.
What would be a good trading strategy if the markets were gaussian?
- What do you mean by markets? Returns? Trends? Prices? Volatilities?
- It has been argued that returns are a Pareto (power) distribution.
- Trends can be modeled as linear plus noise. The noise could be gaussian. In which case you could do something like mean reversion strategy. Is the trend really linear though? If it's linear does it remain linear or can the trend direction change? Is the noise really gaussian though? If it's gaussian does it remain gaussian or can the noise distribution change?
Here is a description for the optimal strategy for Gaussian market. The problem is that such market can not exist We discussed the subject here - http://www.elitetrader.com/vb/showthread.php?s=&threadid=195603
Separate names with a comma.