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

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

2007-05-21

arxiv.org/abs/0705.2820v1

Economy

Quantitative Finance

Trading and Market Microstructure

3 pages

Scientific paper

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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