If the price falls through the stop-loss, a sell signal is generated and the stop-loss will be placed above the price series. If the price declines, the stop-loss will decline. If the price rises, the stop-loss is not changed. If the price rises through the stop-loss a buy signal is generated and the stop-loss is placed below the price series. The stop-loss will follow the price series at a x% distance. On a buy (sell) signal a long (short) position is maintained. This strategy will be extended with a time delay filter and a fixed holding period. In total our group of filter rules consists of 600 trading strategies.


As can be seen in Appendix B we can construct a total of 5350 trading strategies (2760 MA-rules, 1990 TRB-rules, and 600 Filter-rules) with a limited number of values for each parameter. Each trading strategy divides the data set of prices in three subsets. A buy (sell) period is defined as the period after a buy (sell) signal up to the next trading signal. A neutral period is defined as the period after a neutral signal up to the next buy or sell signal. The subsets consisting of buy, sell or neutral periods will be called the set of buy, sell or neutral days.

2.4  Performance measure

2.4.1  Cocoa futures prices

Suppose Pt is the level of the continuous futures price series at the end of day t and Post is the position held in the market by the trader at day t. When trading a futures contract, it is required to hold some margin on a margin account to protect the broker against defaults of the traders. Profits and losses are directly added and subtracted from the margin. A risk-free interest rate can be earned on the margin account. Suppose a trader takes a long or short position in the market against the settlement price at day t-1, Pt-1, and assume that he deposits Pt-1 on his margin account. In this case the broker is fully protected against defaulting7. Then the margin of the trader at the end of day t is equal to
Mt=(1+rtf)Mt-1+(Pt-Pt-1) Post,
where Mt-1=Pt-1, if as in the case described above the position is held for the first day, otherwise Mt-1 is just the margin build up until time t-1. Further, rtf is the daily
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