Entropy-Oriented Trading Strategy Framed by the Second Law

Summary

The document introduces Entropy Oriented Trading, a proposed strategy that applies thermodynamic ideas to investment. Its central design choice is to select state variables so the trading strategy satisfies the second law of thermodynamics. The author then uses that framing to derive a relationship between the strategy’s return on investment and the rate of price change.

The stated result is that the strategy’s ROI is at least as high as the rate of price change. However, the excerpt does not explain how state variables are defined, how positions or trades are generated, or what assumptions support the proof. It also supplies no market, instrument, backtest, or live-trading evidence. Readers can learn the strategy’s stated conceptual premise and claimed result, but cannot use this short description to evaluate implementation, risk, or empirical performance.

Key ideas

• The proposal applies thermodynamic concepts to a financial trading strategy.
• Its state variables are selected to make the strategy satisfy the second law of thermodynamics.
• The author claims the strategy’s ROI is no lower than the rate of price change.
• The excerpt does not specify trading rules or provide empirical performance evidence.

Tags

# 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









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.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.