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Managing Subjectivity with Objective Functions

Every day,¬†traders must make decisions: What to trade. When to enter. How large a position to take. When to exit. Whether the system is healthy. Discretionary traders acknowledge the subjectivity of their decisions and draw on experience. Systematic traders use objective functions designed to identify important decision criteria and quantify […]

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Backtesting and Cognitive Dissonance

Cognitive dissonance is the term used to describe the discomfort people have when they are expected to believe two or more ideas that, on their face, seem to be contradictory. Backtesting is the application of a trading system to an historical data series. Expert opinions of backtesting bring about cognitive […]

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