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----- Original Message -----
<DIV
>From:
Herman vanden
Bergen
To: <A title=amibroker@xxxxxxxxxx
href="">AmiBroker
Sent: Sunday, July 14, 2002 7:47 AM
Subject: [amibroker] How to spot over
optimizing
Optimizing has been discussed at several times on this list, but never
haveI seen a check-list that could help you identify over optimizing.I
welcomeadditions to the small list below. If we can identify degrees
ofover-optimization we can use the same tool to rate robustness, this
becausethey are somewhat complementary.If any of the following
statements are True you may be over-optimizing:1) The system works on
only one stock2) The gains are erratic with a final big gain3)
Optimization values are scattered (random peaks on a 3D chart)4) Gains are
too good to be true5) The equity line is flat6) The system only works
in recent years7) It doesn't work out-of-sample (I use 8y dev, 2y outof
sample testing)8) Optimizing parameters vary widely for different time
periods9) Greater than 75% winning trades7) ... what can you
add?
A. Results obtained in single
trending market.
B. Insufficient number of
signals.
C. Caution if not tested with out
of sample data.
It seem thatif you
overlay the equities for many systems many appear tofail for the same
periods (use 10 year data), I take this as a sign that thesystem pickup
on a true market anomaly. It seems to indicates that thereare times that
the market is incoherent (chaos rules) and that most systemswill not
perform well. Combining equities can produce a "Market Coherence"(please
suggest a better name) indicator which would tell you when tradingis
highly risky. Or taking the inverse; a "Market Chaos" indicator.
Bravetraders will flip all their signals during those periods
:-)Since there are many parameters one can optimize I take note of the
gainimprovement that comes with selectively activating various stagesof
thesystem. I start with the most basic form and add/measure features as I
addthem. An unreasonable large jump in gain for any one change makes it
suspectand I will pick it apart manually for a few
trades.------------------------
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