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Re: [amibroker] Trading system development and simulations



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I may have introduced, or perhaps identified, a common logical leap into oblivion which is distracting when discussing the random nature of the marketor stocks. If a time series has characteristics of a random distribution,i.e. if its distribution is "close enough" to another distribution, I suggest that may not be of the utmost importance to the trader. The technical analysts is implicitly hoping for is some significance to the time behaviorof the time series, the history in this context. If the next trade is purely random and a Markov process, independent of the previous information, why not simply place your bets? Contrary to popular intuition of the general population, hopefully not of this group, if there have been a dozen consecutive heads from a coin toss - the likelihood of the next toss being headsis --- 50%.

You may find message http://groups.yahoo.com/group/amibroker/message/19978 to be relevant. It displays two curves with identical random distributionshowever one has an obvious history while the other does not. I have reposted the gif to this note.

I suggest we are more interested in the history than the distribution, in most cases.

Cordially,

Richard

Message ----- 
From: E Winters 
To: amibroker@xxxxxxxxxxxxxxx 
Sent: Saturday, June 29, 2002 1:19 PM
Subject: Re: [amibroker] Trading system development and simulations


Richard,
You have stated the null hypothesis - that trades occur in a random sequence. To test the alternative hypothesis that their was a pattern to the trades you would calculate the z statistic for the observed sequence of trades and compare the calculated z with the tabulated z for a predetermined level of significance. 1 to 5 percent is good. If the calculated z statisticis outside the expected range then you would have reason to suspect that the sequence of trades was non-random. This of course assumes that the trades follow a binomial distribution curve, which does fit market behavior well, but it does give an idea of how random the trades are.
Regards,
Ed
----- Original Message ----- 
From: Richard Alford 
To: amibroker@xxxxxxxxxxxxxxx 
Sent: Saturday, June 29, 2002 10:06 AM
Subject: Re: [amibroker] Trading system development and simulations


If the process is random (as the game likely is) there is no such thingas a "streak", specifically it is a Markov process with no history feedback. It would be interesting to understand just what Tharp's game teaches.

Some think/hope/assume/pray/etc, btw, that there is information in the time history of an security. A "system" that exploits this history and getto conditions which are favorable may indeed have a "streak".  

www.bjmath.com has some interesting articles. The BJ is BlackJack, which has well know properties that can tilt the odds towards a player at times.

Cheers

Richard

----- Original Message ----- 
From: E Winters 
To: amibroker@xxxxxxxxxxxxxxx 
Sent: Friday, June 28, 2002 6:02 PM
Subject: Re: [amibroker] Trading system development and simulations


David,
Van Tharp has a demo of his trading program on his web site. If you agree to get a free copy of his newsletter and register (he does send announcements about his courses to registered users) you can download it and tryit out. Look for the free trading game box on the main page at www.iitm.com

One theory is based on the theory of runs. When you are on a winningstreak you should risk more per trade until you have a loser. Try adding to winning streaks and see how it improves trading.
Regards,
Ed
----- Original Message ----- 
From: David Holzgrefe 
To: amibroker@xxxxxxxxxxxxxxx 
Sent: Friday, June 28, 2002 5:41 PM
Subject: Re: [amibroker] Trading system development and simulations


AL an interesting article , Has anyone tried his trading game ?? what did they learn from it 

David
----- Original Message ----- 
From: Avcinci 
To: amibroker@xxxxxxxxxxxxxxx 
Sent: Saturday, June 29, 2002 6:32 AM
Subject: [amibroker] Trading system development and simulations


Here is a very interesting article I got from Tharp's forum by Frank Gallucci. It is about trading system development and simulating. It's agood read: http://www.iitm.com/Weekly_update/simulations1.htm


Al Venosa

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<DIV><FONT face=Arial size=2>Actually, my comments most directly addressed the 
concept of "streaks", mentioned in the referenced post about Tharp's money 
game:<EM> If the process is random (as the game likely is) there is no such 
thing as a "streak", specifically it is a Markov process with no history 
feedback.&nbsp; It would be interesting to understand just what Tharp's game 
teaches.&nbsp;</EM></FONT></DIV>
<DIV><EM><FONT face=Arial size=2></FONT></EM>&nbsp;</DIV>
<DIV><FONT face=Arial size=2>I may have introduced, or perhaps identified, a 
common logical leap into&nbsp;oblivion which is distracting when discussingthe 
random nature of the market or stocks.&nbsp; If a&nbsp;time series has 
characteristics of a random distribution, i.e. if its distribution is "close 
enough" to another distribution, I suggest&nbsp;that may not be of the utmost 
importance to the trader.&nbsp; The technical analysts is implicitly hopingfor 
is some significance to the time behavior of the time series, the history in 
this context.&nbsp; If the next trade is purely random and a Markov process, 
independent of the previous information, why not simply place your bets?&nbsp; 
Contrary to popular intuition of the general population, hopefully not of this 
group, if there have been a dozen consecutive heads from a coin toss - the 
likelihood of the next toss being heads is --- 50%.</FONT></DIV>
<DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
<DIV><FONT face=Arial size=2>You may find message <A 
href="http://groups.yahoo.com/group/amibroker/message/19978";>http://groups.yahoo.com/group/amibroker/message/19978</A>&nbsp;to 
be relevant.&nbsp; It displays two curves with identical random distributions 
however one has an obvious history while the other does not.&nbsp; I have 
reposted the gif to this note.</FONT></DIV>
<DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
<DIV><FONT face=Arial size=2>I suggest we are more interested in the history 
than the distribution, in most cases.</FONT></DIV>
<DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
<DIV><FONT face=Arial size=2>Cordially,</FONT></DIV>
<DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
<DIV><FONT face=Arial size=2>Richard</FONT></DIV>
<DIV>&nbsp;</DIV>
<DIV>&nbsp;Message ----- </DIV>
<BLOCKQUOTE 
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV 
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B> 
<A title=e.winters@xxxx href="mailto:e.winters@xxxxxxxxxx";>E 
Winters</A> </DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A title=amibroker@xxxxxxxxxx 
href="mailto:amibroker@xxxxxxxxxxxxxxx";>amibroker@xxxxxxxxxxxxxxx</A> </DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Saturday, June 29, 2002 1:19 
PM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> Re: [amibroker] Trading system 
development and simulations</DIV>
<DIV><BR></DIV>
<DIV><FONT face=Arial size=2>Richard,</FONT></DIV>
<DIV><FONT face=Arial size=2>You have stated the null hypothesis - that trades 
occur in a random sequence.&nbsp; To test the alternative hypothesis that 
their was a pattern to the trades you would calculate the z statistic forthe 
observed sequence of trades and compare the calculated z with the tabulated z 
for a predetermined level of significance.&nbsp; 1 to 5 percent is good.&nbsp; 
If the calculated z statistic is outside the expected range then you would 
have reason to suspect that the sequence of trades was non-random.&nbsp; This 
of course assumes that the trades follow a binomial distribution curve, which 
does fit market behavior well, but it does give an idea of how random the 
trades are.</FONT></DIV>
<DIV><FONT face=Arial size=2>Regards,</FONT></DIV>
<DIV><FONT face=Arial size=2>Ed</FONT></DIV>
<BLOCKQUOTE 
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV 
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B> 
<A title=richard.alford@xxxx href="mailto:richard.alford@xxxx";>Richard 
Alford</A> </DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A title=amibroker@xxxxxxxxxxxx 
href="mailto:amibroker@xxxxxxxxxxxxxxx";>amibroker@xxxxxxxxxxxxxxx</A></DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Saturday, June 29, 2002 10:06 
AM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> Re: [amibroker] Tradingsystem 
development and simulations</DIV>
<DIV><BR></DIV>
<DIV><FONT face=Arial size=2>If the process is random (as the game likely 
is) there is no such thing as a "streak", specifically it is a Markov 
process with no history feedback.&nbsp; It would be interesting to 
understand just what Tharp's game teaches.</FONT></DIV>
<DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
<DIV><FONT face=Arial size=2>Some think/hope/assume/pray/etc, btw, that 
there is information in the time history of an security.&nbsp; A "system" 
that exploits this history and get to conditions which are favorable may 
indeed have a "streak".&nbsp; </FONT></DIV>
<DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
<DIV><FONT face=Arial size=2><A 
href="http://www.bjmath.com";>www.bjmath.com</A> has some interesting 
articles.&nbsp; The BJ is BlackJack, which has well know properties that can 
tilt the odds towards a player at times.</FONT></DIV>
<DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
<DIV><FONT face=Arial size=2>Cheers</FONT></DIV>
<DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
<DIV><FONT face=Arial size=2>Richard</FONT></DIV>
<DIV>&nbsp;</DIV>
<DIV>----- Original Message ----- </DIV>
<BLOCKQUOTE 
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV 
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B> 
<A title=e.winters@xxxx 
href="mailto:e.winters@xxxx";>E Winters</A> </DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A 
title=amibroker@xxxxxxxxxxxxxxx 
href="mailto:amibroker@xxxxxxxxxxxxxxx";>amibroker@xxxxxxxxxxxxxxx</A> 
</DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Friday, June 28, 2002 6:02 
PM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> Re: [amibroker] Trading 
system development and simulations</DIV>
<DIV><BR></DIV>
<DIV><FONT face=Arial size=2>David,</FONT></DIV>
<DIV><FONT face=Arial size=2>Van Tharp has a demo of his trading program 
on his web site.&nbsp; If you agree to get a free copy of his newsletter 
and register (he does send announcements about his courses to registered 
users) you can download it and try it out.&nbsp; Look for the free trading 
game box on the main page at </FONT><FONT face=Arial size=2><A 
href="http://www.iitm.com";>www.iitm.com</A></FONT></DIV>
<DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
<DIV><FONT face=Arial size=2>One theory is based on the theory of 
runs.&nbsp; When you are on a winning streak you should risk more per 
trade until you have a loser.&nbsp; Try adding to winning streaks andsee 
how it improves trading.</FONT></DIV>
<DIV><FONT face=Arial size=2>Regards,</FONT></DIV>
<DIV><FONT face=Arial size=2>Ed</FONT></DIV>
<BLOCKQUOTE 
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV 
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B> 
<A title=dtholz@xxxx 
href="mailto:dtholz@xxxx";>David Holzgrefe</A> </DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A 
title=amibroker@xxxxxxxxxxxxxxx 
href="mailto:amibroker@xxxxxxxxxxxxxxx";>amibroker@xxxxxxxxxxxxxxx</A> 
</DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Friday, June 28, 2002 5:41 
PM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> Re: [amibroker] Trading 
system development and simulations</DIV>
<DIV><BR></DIV>
<DIV><FONT face=Arial size=2>AL an interesting article , Has anyone 
tried his trading game ?? what did they learn from it </FONT></DIV>
<DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
<DIV><FONT face=Arial size=2>David</FONT></DIV>
<BLOCKQUOTE 
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV 
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B> 
<A title=avcinci@xxxx 
href="mailto:avcinci@xxxx";>Avcinci</A> </DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A 
title=amibroker@xxxxxxxxxxxxxxx 
href="mailto:amibroker@xxxxxxxxxxxxxxx";>amibroker@xxxxxx</A> 
</DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Saturday, June 29, 2002 
6:32 AM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> [amibroker] Trading 
system development and simulations</DIV>
<DIV><BR></DIV>
<DIV>Here is a very interesting article I got from Tharp's forum by 
Frank Gallucci. It is about trading system&nbsp;development and 
simulating. It's a good read: <A 
href="http://www.iitm.com/Weekly_update/simulations1.htm";>http://www.iitm.com/Weekly_update/simulations1.htm</A></DIV>
<DIV>&nbsp;</DIV>
<DIV><BR>Al Venosa</DIV>
<DIV><BR><TT>Your use of Yahoo! Groups is subject to the <A 
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