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<SPAN
class=170473116-20062002>William:
<SPAN
class=170473116-20062002>
I think the point
Al was making with his idea of using the Simulator is that you save TIME.
If you optimize (bad word--deduce a system) based on the last two years up until
yesterday, and then you wish to test "out-of-sample" for 6 months, you willhave
to sit and collect the next six months worth of data before you can draw a
conclusion about the worth of the system you have developed. The idea
behind the simulator as I understand it is to generate the next six months worth
of data NOW and if results are satisfactory, THEN begin trading
tomorrow.
<SPAN
class=170473116-20062002>
The purpose is to
save time.
<SPAN
class=170473116-20062002>
However, you
shoot yourself in the foot if the conclusion is that the simulated data is
worthless as an out-of-sample test.
<SPAN
class=170473116-20062002>
I think I have
Al's purpose stated correctly.
<SPAN
class=170473116-20062002>
Ken
<FONT face=Tahoma
size=2>-----Original Message-----From: wpeters_1
[mailto:wpeters_1@xxxx]Sent: Thursday, June 20, 2002 1:17
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: RE: [amibroker]
Trends, random series
<FONT
color=#000000>Thank you Al for that..i'm not sure that you saw this follow up of
mine:
<FONT color=#0000ff face=Arial
size=2>
<FONT
face=Arial><SPAN
class=875075116-20062002>"You then have to go on and ask what would be
the value of studying biases introduced in a series of randomised data by
mathematicians which does not occur in the real world market
place.
<FONT
color=#0000ff face=Arial size=2>
<FONT
face=Arial>Surely what would be valuable
is to study and root out biases already in the market due to human
behaviour or whatever. And get to learn about human behaviour and the effect on
the market place.<SPAN
class=875075116-20062002>"
<FONT
face=Arial><SPAN
class=875075116-20062002>
<FONT
face=Arial><SPAN
class=875075116-20062002>
<FONT
face=Arial><SPAN
class=875075116-20062002>
<FONT
face=Arial><SPAN
class=875075116-20062002>Also-
<FONT
face=Arial>I still
don't see the value in this approach over using real data history. If
at the core of your argument you are saying there is some possibility of this
system reflecting the future, what might happen in the future etc, then so
could the data from the past..
<FONT
face=Arial><SPAN
class=875075116-20062002>
<FONT
face=Arial>For me it
always comes back to 'where is the value' over straight ticker history, which we
know is as real as its going to get. Humanistic patterns have been more or less
the same over many years at a base level and they are represented
in history of the chart for us to study. Any tinkering with those
patterns and you get some artificial result which will never happen in the real
world market....and again what is the worth of studying that data over the
real?
<FONT
face=Arial><SPAN
class=875075116-20062002>
<FONT
face=Arial>Appreciate
your courage
<FONT
face=Arial><SPAN
class=875075116-20062002>
<FONT
face=Arial><SPAN
class=875075116-20062002>William
<FONT
face=Arial><SPAN
class=875075116-20062002>
<FONT
face=Arial><SPAN
class=875075116-20062002>
<FONT
color=#0000ff face=Arial size=2>
<FONT face=Tahoma
size=2>-----Original Message-----From: Avcinci
[mailto:avcinci@xxxx]Sent: Wednesday 19 June, 2002 07:12
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: Re: [amibroker]
Trends, random series
William (and Richard),
Let me try to explain Leo’s
scrambler. It was developed by Tushar Chande from his book Beyond Technical
Analysis, 2nd ed. Chande randomly rearranges the data of a ticker to create
new sequences. He does this as follows: he observes the relationship between
the O, H, L, and C of the 2nd bar by using the C of the
1st bar as reference. So, he writes the relationship as:
DeltaO = O – ref(C,-1);
DeltaH = H – ref(C,-1);
DeltaL = L – ref(L,-1);
DeltaC = C – ref(C,-1);
He samples with replacement
with these formulas and creates patterns that bear the market’s signature as
defined by relative price relationships. The next step is to use a random
number generator to scramble the bars. When you have a new sequence, you need
a starting point, which is usually the prior C. The new bar is derived from
the prior C as follows (where the Syn prefix stands for the new synthetic
values):
Syn-C = ref(C,-1) + deltaC;
Syn-H = ref(C,-1) + deltaH;
Syn-L = ref(C,-1) +deltaL;
Syn-O=ref(C,-1) + deltaO;
He calculates the interbar
relationships as defined above for a ticker of your choice. He uses a random
number generator to pick a number from 1 to x (x determined by the no. ofbars
you want to scramble). That number is the next bar of the sequence. Suppose on
the 10th pick, you pick bar 5. Then the original bar 5 becomesbar
10 of the new sequence. The bars may repeat. You can generate as long a
sequence as desired. You use the synthetic values determined by the equations
above to establish the next bar’s appearance. Thus, what you wind up doing is
encapsulating the market behavior in the original bar 10 and reproducing it in
another sequence to create new synthetic data. You can generate a varietyof
chart patterns of any length using data scrambling. According to Chande, you
can generate 100 years of data and test your system against a variety of
market conditions. Since these are the types of patterns you are likely to see
in the future, this is the most rigorous out-of-sample testing you can
achieve.
The above commentary was partly
plagiarized from Chande’s book, and it is merely a synopsis. To geta clearer
understanding of the methodology with spreadsheet examples, you should read
his chapter devoted to scrambling.
I have attached 2 gifsshowing
what scrambled data look like on 2 different tickers. Note that the patterns
are not any more unusual than those of normal chart patterns, and you cansee
definite trends developing. In fact, if you look at recent real charts ofthe
market indices, you will see many instances of V-tops and V-bottoms, which is
what William was concerned about earlier today. Hope this helps. Many thanks
to Leo Timmermans for programming Chande’s scrambler for Amibroker.I asked
him recently if he could program it in such a way to create synthetic data for
an entire watch list at one time. That might be tricky, but he said he would
look into it.
Al V.
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
<A href=""
title=wpeters_1@xxxx>wpeters_1
To: <A
href=""
title=amibroker@xxxxxxxxxxxxxxx>amibroker@xxxxxxxxxxxxxxx
Sent: Wednesday, June 19, 2002 1:22
PM
Subject: RE: [amibroker] Trends,random
series, etc : was MetaStock and AmiBroker
<FONT color=#0000ff face=Arial
size=2>AL,
<FONT color=#0000ff face=Arial
size=2>
<FONT color=#0000ff face=Arial
size=2>With randomised data isn't there a chance that the so-called 'trend'
can reverse on the next tick 'more-so' than data based on human
intervention. And that includes mechnical systems (ie. if enough traders
started using a certain indicator).
<FONT color=#0000ff face=Arial
size=2>The obvious predictability in human behaviour is what can giveyou
the little advantage and this is not in totally randomised
data.
<FONT color=#0000ff face=Arial
size=2>
<FONT color=#0000ff face=Arial
size=2>Surely if so your 'randomised' data 'trend' does not have an equal
chance of reversing on each and every tick then its not
randomised.
<FONT color=#0000ff face=Arial
size=2>
<FONT color=#0000ff face=Arial
size=2>Very interesting topic.
<FONT color=#0000ff face=Arial
size=2>William
<FONT face=Tahoma
size=2>-----Original Message-----From: Al Venosa
[mailto:avcinci@xxxx]Sent: Wednesday 19 June, 2002 10:54
AMTo: amibroker@xxxxxxxxxxxxxxxSubject: Re:
[amibroker] Trends, random series, etc : was MetaStock and
AmiBroker
Richard,
I'm glad you took the liberty of changing the subject line. I don't
think you are being a pessimistic, grumpy old man (sorry, don't know how
old you are). Let me throw in another 2 cents into the discussion of
trends. You said in order to have a trend, there must exist some
information in the immediate past that would cause the trend to persist
for a long enough time to profit from the move. I cannot agree more. That
is absolutely true. A bad earnings report comes out on INTC, and the
market immediately reacts by selling. This is further fueled by some
nitwit analyst who changes his buy recommendation to hold or sell (of
course, always after the fact!). Then, all the other individual
"investors" climb aboard and do more selling, driving the prices still
further down. Then, the company foretells that over the next several
quarters there will be more of the same in regards to diminished sales,
inducing further pessimism that drives the prices still further. All of
this information results in a downward trend. This does not nor cannot
happen with random events like coin tosses. So, technically speaking,you
are perfectly correct in your assertions .
Now, the trend follower comes in. He couldn't care less what is driving
the prices down. In fact, he purposefully never pays attention to news
events and announcements that may drive prices in one direction or
another. He doesn't care about the cause of the trend. All he does is
climb aboard the resulting trend, using whatever entry he has fashioned to
enable him to take advantage of this 'breakout' and whatever exit that
enables him to exit when the trend falters. Who was taking the other side
of the market when Neeson was loading up on Nikkei futures, driving the
Barings Bank into bankruptcy? The trend followers who recognized whatwas
happening and capitalized. What I'm saying is, the trend follower buys or
sells all breakouts (however you want to define the term 'breakout') and
hopes that the resulting price behavior continues long into the future.
With the scrambler, these 'trends' can indeed take place even with
randomized data, as you have already pointed out. What I'm suggestingis
that your system of entries and exits doesn't have a clue what causedthe
breakout to occur because it's nothing more than a mathematical algorithm
that trades based on certain signals programmed by the user when certain
price behavior occurs. I contend you can test your system on such price
behavior just to learn how well the system reacts to price breakouts and
to see if, indeed, it is effective in finding trends in the data, albeit
randomized data. By the way, these comments are not limited to trend
following systems. I chose that trading approach merely as an exampleto
make my point.
Richard, I'm not trying to be argumentative on this topic. I'm just
pointing out why I think there might be value in testing a fully optimized
trading model on randomized data. Thanks for the provocative discussion.
Al V.
>From: "Richard Alford"
>Reply-To: amibroker@xxxxxxxxxxxxxxx
>To:
>Subject: [amibroker] Trends, random series, etc : was
MetaStock and AmiBroker
>Date: Wed, 19 Jun 2002 08:35:15 -0500
>
>I agree on the oxymoronic nature of so called random
series. The problem results from using very particular distributions for
the random numbers which allows the mathematicians to write books and
teach classes. The Gaussian functions are one of the most well-behaved
functions around.
>
>wrt trends in scrambler and other "random" time series-
simply stated if they are truly random there is absolutely no information
about the past in the next event. Your coin toss observation is a great
example: given the 1/1000 case of 10 heads in a row the odds of another
head are precisely 50% for the next toss.
>
>In order to discuss a "trend" there must be some
information that persists. One can generally, perhaps always, see trends
in a random series - in hindsight - however it contains no predictive
information. There are systems that seek to identify trending vs. trading
range behavior (I think Ehlers addresses this issue - can't say with how
much success), however, they are inaccurate at the changes. A moving
average on the coin toss series will identify trends - but the lag inthe
moving average that we all know of and try to remove is the "hindsight"
problem.
>
>Trend scale is still another issue. The apparent fractal
behavior of the stock market suggests that one can find trends, and/or
search for trends, over any time scale desired. (The inflationary or
perhaps evolving nature of economies have placed a long term upward bias
on the trends that can confuse the issue.) Once again a moving average of
any length on a random series will display periods of upward and downward
"trends".
>
>Sorry to be such a pessimistic old grump.
>
>Cordially,
>
>Richard
>
> ----- Original Message -----
> From: Avcinci
> To: amibroker@xxxxxxxxxxxxxxx
> Sent: Tuesday, June 18, 2002 8:19 PM
> Subject: Re: [amibroker] Re: MetaStock and AmiBroker
>
>
> Richard,
>
> >>distribution of the trends is predictable fora
random series >> This sounds oxymoronic to me, i.e., predictable
distribution of random trends. But, I'll take your word for it. :-))
>
> Regarding the scale when speaking of trends, I was
referring to weeks to months, perhaps even a year or two at most (stocks,
not futures), but not decades. This brings us back to discussing the
Scrambler. You said you don't hold much if any value in it, but can you
elaborate just a little more on what you mean in terms of the scale Iam
referring to, because in a period of 130 trading days, I noticed some
pretty decent trends develop that lasted long enough to be of value in
system testing? Thanks, Richard. By the way, I agree that this discussion,
interesting as it is, has absolutely nothing to do with Metastock!!
>
> AV
>
> ----- Original Message -----
> From: Richard Alford
> To: amibroker@xxxxxxxxxxxxxxx
> Sent: Tuesday, June 18, 2002 3:55 PM
> Subject: Re: [amibroker] Re: MetaStock and AmiBroker
>
>
> wrt rsi/stochastics/cmo/etc... my point was that they
attempt to identify a phenomenon that has been observed as an indication
of overbought/oversold. There is a reasonable belief that the arithmetic
created to identify that behavior can be a useful indictor of that
condition. The comment offered for Elliot wave and Fibinacci behavioralso
points to a large community that believes that there is a hidden structure
to the market and human behavior - I am not a devotee of that belief,but
I also have my doubts about Madam Cleo....
>
> wrt trends in random numbers: there is, of course, a trend
between any two non=equal numbers. Given a suitable sample, the
distribution of the trends is predictable for a random series - probably
also random and if the normal Gaussian (pardon the pun) distribution is
used, as the derivative (or instantaneous slope/trend) is a skewed
Gaussian. Interesting to the statisticians but not very useful to the
average investor.
>
> wrt: trending 30% - that really has to be a matter of
scale. If you chose a suitably long moving average you can probably even
consider today as part of a long time upward trend - not particularly
useful - although even my meager portfolio looks better today than itdid
in 1970 - not saying much....
>
> Interesting discussion - don't have the faintest ideawhat
it has to do with MetaStock :)
>
> Cheers,
>
> Richard
>
>
> ----- Original Message -----
> From: Al Venosa
> To: amibroker@xxxxxxxxxxxxxxx
> Sent: Tuesday, June 18, 2002 2:28 PM
> Subject: Re: [amibroker] Re: MetaStock and AmiBroker
>
>
> Thanks, Richard. I always enjoy your mathematical
insights. I hope you didn't get the impression I was suggesting
'optimizing' on random bars. I was merely suggesting 'testing' your
already optimized system on the scrambled data, seeing if it can detect
those occasional occurrences of non-random behavior of random numbers,
that's all. Certainly if a trend-following system can detect trends in
random price bars, it ought to be able to detect them in real, non-random
price bars, too, don't you think? Markets trend only about 30% of the
time, as I am told, so wouldn't you consider non-trending markets (i.e.,
sideways markets) somewhat representative of random price behavior?
>
> I also get the impression you are not an advocate of
overbought/oversold oscillators, right?
>
> Al Venosa
> avcinci@xxxx
> >From: "Richard Alford"
> >Reply-To: amibroker@xxxxxxxxxxxxxxx
> >To:
> >Subject: Re: [amibroker] Re: MetaStock and AmiBroker
> >Date: Tue, 18 Jun 2002 12:55:33 -0500
> >
> >The non-random appearance of random numbers is a very
well know phenomenon - probably accounts for the continued enthusiasmin
slot machines in Vegas...
> >
> >I stand by my comments. In particular, the various
oversold/bought indicators rely on the observation that the close tends to
be higher in the l-h range in the overbought condition - the persistence
of such a trend is interpreted as buy-sell behavior.
> >
> >I personally see no use in random data. There is no
information in random data and no expectation of the past affecting the
future - the only reason for technical analysis (other than too much time
on one's hands) is to glean information about the near future. There are,
of course, degenerate uses for random numbers in testing, but to test,
build, or, heaven forbid - optimize, using random time series is pointless
at best.
> >
> >wrt coin tosses: the coin is a Markov process of
length 0 - no memory. If the market is the same, we may as well head for
Vegas and get free drinks as we go broke. (OK - the market MAY be a fair
game, but I doubt it.)
> >
> >Just some thoughts...
> >
> >Richard
> > ----- Original Message -----
> > From: Al Venosa
> > To: amibroker@xxxxxxxxxxxxxxx
> > Sent: Tuesday, June 18, 2002 9:57 AM
> > Subject: Re: [amibroker] Re: MetaStock and AmiBroker
> >
> >
> > Well, Richard, to be honest, I haven't yet done any
back (er, I mean forward) testing of the random time bars created by
Scrambler. However, I have looked at the results of randomly scrambling
the bars and watching them form on the screen, and you can see definite
trends develop that can last several months, much like in real life. So,
at least theoretically, it seems to me that, if you are testing a
short-term or intermediate-term trend-following system, it ought to be
able to pick up on those short, seemingly non-random trends (even though
they were developed from a random number generator). Remember, if youflip
an honest coin 1000 times, there is a low but finite probability thatit
will come up heads 10 or 12 or 15 times in a row.
> >
> > AV
> >
> >
> > >From: "Richard Alford"
> >
> > >Reply-To: amibroker@xxxxxxxxxxxxxxx
> > >To:
> > >Subject: Re: [amibroker] Re: MetaStock and
AmiBroker
> > >Date: Tue, 18 Jun 2002 09:48:35 -0500
> > >
> > >I understood that the underlying premise of
technical analysis was that there IS information in the price-volume
behavior. If you test against random data the results had better result in
random behavior - perhaps mean behavior is more accurate.
> > >
> > >Perhaps I am delusional, however, I would
appreciate insight into the value of random time bars?
> > >
> > >Cordially,
> > >Richard
> > > ----- Original Message -----
> > > From: Al Venosa
> > > To: amibroker@xxxxxxxxxxxxxxx
> > > Sent: Tuesday, June 18, 2002 9:23 AM
> > > Subject: Re: [amibroker] Re: MetaStock and
AmiBroker
> > >
> > >
> > > Sorry, Dimitris, I thought you knew about it. Go
to post 19331 and download it, following Leo Timmerman's instructions.
What he has done is created a VBscript tool based on Tuchar Chande's price
bar scrambler that scrambles all the bars of a given ticker from the
previous x bars (bars and ticker set by the user) and then re-orders those
bars randomly into the future, thus creating a ticker that you can use in
forward-testing. If you set the no. of bars to, say, 130, you can generate
6 months worth of new data for each ticker you do this on. Very, very
cool. It differs from William's Simulator in that it actually generates
new data rather than repeating existing data from the last x bars. Try it,
you'll like it.
> > >
> > > Al Venosa
> > >
> > > >From: "dtsokakis"
> > >
> > > >Reply-To: amibroker@xxxxxxxxxxxxxxx
> > > >To: amibroker@xxxxxxxxxxxxxxx
> > > >Subject: [amibroker] Re: MetaStock and
AmiBroker
> > > >Date: Tue, 18 Jun 2002 13:49:30 -0000
> > > >
> > > >What is Leo's scrambler ??
> > > >DT
> > > >--- In amibroker@xxxx, "Al Venosa" wrote:
> > > > >
> > > >
> > >
> > >
> >
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