This paper introduces a new method for evaluating a trading system based on its past performance. The method is a hypothesis test that asks whether the system is making random trades. The test controls for price behavior during the test period and the trade characteristics of the system being tested. A system should be traded only if the null hypothesis of random trading is rejected.

Prof. Alex Strashny

http://strashny.com/

Summary:

• Introduction

• Hypothesis Test

• Performance Measures

• Critical Values

• Conclusion and Acknowledgments

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