This chapter defines what is meant by a “trading strategy” in the context of financial markets and discusses why “buy low, sell high” would be an oversimplification in describing many, if not most, trading strategies, including hedging strategies, statistical arbitrage, etc. The chapter motivates and outlines the remainder of the book, which gives a detailed description, including mathematical formulas, for trading strategies across diverse asset classes and trading styles, including stocks, options, fixed income, futures, ETFs, indexes, commodities, foreign exchange, convertibles, structured assets, volatility, real estate, distressed assets, cash, cryptocurrencies, weather, energy, inflation, global macro, infrastructure, and tax arbitrage. The chapter also discusses the intrinsically ephemeral nature of many trading signals and strategies, including due to the impact of high-frequency trading, and the use of data mining and machine learning to discern such signals, and outlines how this is dealt with in practical applications.
KeywordsAsset class Bond Cash Commodity Convertible bond Cryptocurrency Currency Distressed asset Energy Exchange-traded fund (ETF) Futures Global macro Hedging strategy Index Infrastructure Market Option Out-of-sample backtesting Real estate Risk management Statistical arbitrage Structured assets Tax arbitrage Trading strategy Weather.
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