Mechanical trading systems have many components. The common components usually include entry signals, exit signals, trade management actions like moving stops or moving targets, scaling in, scaling out, position sizing, profit targets, bar period, market traded, trading times of day and so on.
Designing a trading strategy entails putting these components together into a system.
The ESA is intended to be an entry signal analyzer. Meaning it's intended as a tool to test the edge of the entry signal component of the trading systems on its own in isolation as much as possible. Isolation meaning that you remove any trade management, signal based exits, etc.
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Evaluating the effectiveness of the entry signal on its ownAdding a stop/target to the mix
Related Reading Material
“Way of the Turtle”, Curtis Faith
“Building Winning Algorithmic Trading Systems”, Kevin J. Davey
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