Foundation group
Strategy Mechanics
The building blocks that connect prices, signals, decisions, positions, and risk.
Guide map
Read only as far as the decision requires.
Each guide stands on its own while linking forward to the strategy or Results question it supports.
Strategy Mechanics guides
How a systematic strategy is built
A strategy is a chain of observable inputs, timed decisions, positions, exits, and risk—not an indicator with a buy label.
Data fidelity: bars, trades, quotes, and depth
The data you keep determines which market questions a backtest can answer honestly.
Decision time, bar completion, and lookahead
A signal is only valid when every input was knowable before the modeled decision and fill.
Prices, returns, compounding, and annualization
Translate price changes into comparable returns without losing the difference between arithmetic averages and compounded wealth.
Volatility, drawdown, and tail risk
Three different views of risk: typical variability, path-dependent loss, and rare extreme outcomes.
Risk-adjusted performance: Sharpe and its limits
Sharpe compresses average excess return and variability into one ratio; its usefulness depends on the return process behind it.
Correlation and diversification
Diversification depends on how positions move together, how that relationship changes, and which risks the statistic leaves hidden.
Position sizing and risk limits
Sizing determines how a signal becomes portfolio risk and how much error the strategy can survive.