OBJECTIVE LINEAR MODEL (STRATEGY TRADER)
For the Objective Linear Model, the researcher developed an objective model
based on historical tests and observations to predict results. This is defining and
using quantifiable data, running historical tests, and then using the results of the
tests to predict future outcomes.
For instance, the researcher would look at reams of physical data from cancer
patients, and correlate the data with how long the patient lived. After running the
historical tests, the researcher would then obtain the physical data from a cancer
patient, and using the historical test data, attempt to predict how long that cancer
patient will live.
This is exactly what a strategy trader does. He runs historical tests and then uses
that data to take a position in the market. He uses objective, quantifiable data
tested historically to make his trading decisions. Table 1 shows the results of the
tests.