A Permutation-Based Mathematical Heuristic for Buy-Low-Sell-High

Buy low sell high is one of the basic rules of thumb used by individuals for investment although it
is not considered to be a constructive strategy. In this paper, we show how the appropriate
representation of a minute-by-minute trading time series through ordinal (i.e. permutation) patterns
and the use of a simple decision heuristic may surprisingly result in significant benefits. Using the
proposed approach, we run two experiments. The results provide empirical support for the possible
benefit of using simple decision models, even in the context of chaotic minute-by-minute trading. We don't compare our proposed approach to sophisticated methods in trading, but show how a mathematical model adhering to the idea of bounded rationality may result in significant benefits.