Trading Strategies Evolve Towards Chaos

„Trading strategies evolve towards chaotic performance if no improvements are made that are compatible with changes in market regime and microstructure.

The financial markets are highly non-linear dynamic stochastic processes. These types of random processes usually have many hidden modes, and some are even chaotic. Strategies attempt to profit from market moves by oversimplifying price dynamics with the use of rules and heuristics. The objective is to maintain a high enough positive Sharpe ratio for as long as the strategy is used. Unfortunately, due to the non-stationary nature of financial price series, most strategies fail to maintain a positive performance, or what many mistakenly call positive expectation.”

https://www.priceactionlab.com/Blog/2023/01/trading-strategies-chaos/