Entropy Oriented Trading: A Trading Strategy Based on the Second Law of Thermodynamics

2007/05/21 by Yoichi Hirai, Hirai, Yoichi
Economics, Econometrics and Finance · Physics and Astronomy · #Complex Systems and Time Series Analysis #physics.pop-ph #physics.soc-ph #q-fin.TR

paper · pdf · doi:10.48550/arxiv.0705.2820

3 pages

arxiv created 2007/05/21 · arxiv updated 2009/12/01

Abstract

The author proposes a finance trading strategy named Entropy Oriented Trading and apply thermodynamics on the strategy. The state variables are chosen so that the strategy satisfies the second law of thermodynamics. Using the law, the author proves that the rate of investment (ROI) of the strategy is equal to or more than the rate of price change.

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