Preface     xi
Acknowledgments     xiii
Potential Profit as a Measure of Market Performance     1
Profit and Potential Profit     1
Price Flow and C++     4
Why C++?     4
Why Skip Date and Time Classes?     4
Vector for Price Flow     5
Classes for Prices     5
Procedural Programming     7
Object-Based and Generic Programming     8
Example Test1.cpp     11
Object-Oriented Programming     12
Exception Safety     16
Production of Concrete Objects     16
Pardo's Potential Profit     17
Simple Algorithm for a True Reverse System     17
The Program Computing Pardo's Potential Profit     18
Conclusions     20
Potential Profit and Transaction Costs     21
What Is a Trading Strategy?     21
Properties of Potential Profit Strategy     24
"Do Nothing" Strategy     24
Property 1     24
Property 2     24
Property 3     24
Property 4     25
Property 5     27
Property 6     28
Transaction Costs     28
Commissions     28
Slippage     28
The Bid/Asked Spread     30
The Total Transaction Cost     31
Transaction Costs and C++     32
Profit-and-Loss Function     34
The Main Equations     34
C++ Implementation     35
Example Test2.cpp     36
Conclusions     38
R- and L-Algorithms for Maximum Profit Strategy     39
S-Function and S-Matrix     39
S-Function     39
S-Matrix     40
S-Interval and Its Boundaries     40
S-Interval     40
S-Interval with the Right-most Boundary     40
S-Interval with the Left-most Boundary     40
S-Interval with the Left-most and Right-most Boundaries     40
The Best Buying and Selling Points on the S-Interval     41
Polarity of S-Intervals     41
Right Polarity     41
Theorem 3.1     41
Left Polarity     42
Theorem 3.2     42
R-Algorithm     42
L-Algorithm     44
C++ Implementation     44
Coding The R- and L-Algorithms     44
Example Test3.cpp      48
C++ Program Evaluating Potential Profit     51
Conclusions     54
Money Management and Discrete Nature of Trading     55
Denominations     55
Induction and Trading Account Size     58
Growth Function and Optimal B     59
Discrete Nature of Trading     62
Evolution of Account with Constant A[subscript w], A[subscript l], M, b     62
Evolution of Account with Nonconstant A[subscript w], A[subscript l]     71
Conclusions     79
Money Management for Potential Profit Strategy     81
The Best Allocation Fraction for Potential Profit Strategy     81
Self-Financing Restriction     83
Minimal A[subscript 0]     83
Actions and Positions Test4.cpp     87
The First and Second P&L Reserves     89
Rules for Offsetting Positions     92
Classes Trade and Trades     92
Class Position     95
Using Position and Trades Test5.cpp     100
Conclusions     104
Best to Better     103
Algorithm for the First Profit-and-Loss Reserve Strategy     105
Algorithm for the Second P&L Reserve Strategy     109
Program Applying Three Algorithms     118
Conclusions     122
Direct Applications     123
Only in the Past     123
What Are Traders Actually Doing and How Are They Doing It?     123
A Word on Human Intuition     124
What and How Are Academicians Doing?     125
The Bridge     127
Collapse of the Theory?     128
A Word on Potential Profit and Strategy     130
Sleeping Beauty     130
Application to Tick Price Data     130
Application to Daily Price Data     144
War and Peace     147
Conclusions     149
Indicators Based on Potential Profit     151
Performance Measures and indicators     151
Profit Performance of a System     151
Performance of a System Defined as Return on Capital     152
Comparing Single-Market Performance     152
Comparing Markets     153
Moving Versions of Strategies     153
Relationship to Trend and Volatility     153
Reversal Points and Events Filter     154
Increasing Position Points     155
Options on Potential Profit     155
Strategy Evaluation     156
The Evaluation Algorithm     156
Example Test8.cpp     160
Class Distribution     162
Conclusions     169
Statistics of Trades and Potential Profit     171
Statistical Properties of Trades     171
Selection     171
Implementing One by One     174
Program Evaluating Strategy and Trades     183
Input Format     183
The Program Evaluate.cpp     184
Application of Evaluate.cpp to SK05     189
Conclusions     193
Comparing Markets     195
Time Frame and Prices     195
Selected Contracts     195
Data File Format     196
Results of Applications of Maxprof3 and Evaluate     196
CH06     196
SH06     199
WH06     201
LCG06     202
GCG06     204
HGH06     206
CCH06     207
KCH06     209
SBH06     211
CTH06     213
LBH06     214
CLH06     216
USH06     218
SPH06     220
Multimarket Potential Profit Algorithms      222
Epilogue     223
Conclusions     223
Bibliography and Sources     225
About the CD-ROM     229
Index     233