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Modeling Maximum Trading Profits with C++: New Trading and Money Management Concepts

ISBN: 978-0-470-08623-0
264 pages
February 2007
Modeling Maximum Trading Profits with C++: New Trading and Money Management Concepts (0470086238) cover image
"Mr. Salov has taken one of my favorite creations – Perfect Profit – and provided an expanded description of his interpretation of it and put it in your hands with the included software. Like I said fifteen years ago, Perfect Profit is an important tool for the trading system developer. See for yourself."
—Robert Pardo, President, Pardo Capital Limited

"A very in-depth reference for programmers that should serve well into the future. The code herein lends itself well to other syntactically similar programming languages such as Java, PHP, and C#."
—Ralph Vince

The goal of trading is to make money, and for many, profits are the best way to measure that success. Author Valerii Salov knows how to calculate potential profit, and in Modeling Maximum Trading Profits with C++, he outlines an original and thought-provoking approach to trading that will help you do the same.

This detailed guide will show you how to effectively calculate the potential profit in a market under conditions of variable transaction costs, and provide you with the tools needed to compute those values from real prices. You'll be introduced to new notions of s-function, s-matrix, s-interval, and polarities of s-intervals, and discover how they can be used to build the r- and l-algorithms as well as the first and second profit and loss reserve algorithms. Optimal money management techniques are also illustrated throughout the book, so you can make the most informed trading decisions possible.

Filled with in-depth insight and expert advice, Modeling Maximum Trading Profits with C++ contains a comprehensive overview of trading, money management, and C++. A companion CD-ROM is also included to help you test the concepts described throughout the book before you attempt to use them in real-world situations.

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Preface.

Acknowledgments.

CHAPTER 1 Potential Profit as a Measure of Market Performance.

Profit and Potential Profit.

Price Flow and C++.

Pardo’s Potential Profit.

Conclusions.

CHAPTER 2 Potential Profit and Transaction Costs.

What Is a Trading Strategy?

Properties of Potential Profit Strategy.

Transaction Costs.

Transaction Costs and C++.

Profit-and-Loss Function.

Conclusions.

CHAPTER 3 R- and L-Algorithms for Maximum Profit Strategy.

S-Function and S-Matrix.

S-Interval and Its Boundaries.

The Best Buying and Selling Points on the S-Interval.

Polarity of S-Intervals.

R-Algorithm.

L-Algorithm.

C++ Implementation.

C++ Program Evaluating Potential Profit.

Conclusions.

CHAPTER 4 Money Management and Discrete Nature of Trading.

Denominations.

Induction and Trading Account Size.

Growth Function and Optimal B.

Discrete Nature of Trading.

Conclusions.

CHAPTER 5 Money Management for Potential Profit Strategy.

The Best Allocation Fraction for Potential Profit Strategy.

Self-Financing Restriction.

Minimal A0.

Actions and Positions Test4.cpp.

The First and Second P&L Reserves.

Rules for Offsetting Positions.

Classes Trade and Trades.

Class Position.

Using Position and Trades Test5.cpp.

Conclusions.

CHAPTER 6 Best to Better.

Algorithm for the First Profit-and-Loss Reserve Strategy.

Algorithm for the Second P&L Reserve Strategy.

Program Applying Three Algorithms.

Conclusions.

CHAPTER 7 Direct Applications.

Only in the Past.

Sleeping Beauty.

War and Peace.

Conclusions.

CHAPTER 8 Indicators Based on Potential Profit.

Performance Measures and Indicators.

Strategy Evaluation.

Conclusions.

CHAPTER 9 Statistics of Trades and Potential Profit.

Statistical Properties of Trades.

Program Evaluating Strategy and Trades.

Conclusions.

CHAPTER 10 Comparing Markets.

Time Frame and Prices.

Selected Contracts.

Data File Format.

Results of Applications of Maxprof3 and Evaluate.

Multimarket Potential Profit Algorithms.

Epilogue.

Conclusions.

Bibliography and Sources.

About the CD-ROM.

Index.

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VALERII SALOV, PHD, is Vice President and Director of Financial Product Development for Toolkit at NumeriX LLC, a firm that provides software solutions for the pricing and management of derivatives. Previously, Salov worked at Merrill Lynch, where he helped develop automated systems for trading futures, equities, and foreign exchange. He received a PhD in analytical chemistry from the Russian Academy of Sciences.
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