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<FONT color=#000080
size=2>Herman,
<FONT color=#000080
size=2>
These rules are
very good. However I wonder if one should be aware that trying to satisfy
every rule listed will result in constant testing/tweaking trying to get
everything perfect. Some of us, I suspect, are constant tweakers, never
satisfied, and never trading.
<FONT color=#000080
size=2>
I do love the
idea of combining various equity curves and getting out when they all head
south.
<FONT color=#000080
size=2>
<FONT color=#000080
size=2>Thanks,
<FONT face="Vladimir Script" color=#000080
size=5>Rick
<FONT face=Tahoma
size=2>-----Original Message-----From: Herman van den Bergen
[mailto:psytek@xxxx]Sent: Monday, July 15, 2002 5:27
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: RE: [amibroker]
Re: How to spot over optimizing - SummaryHere's the
uncooked and unseasoned stew of things to consider (andunderstand) when
optimizing. May or may not apply to your type of system.- Optimizing
rules vary for different types of trading systems- The system works on
only one stock- The gains are erratic with a final big gain-
Optimization values are scattered (random peaks on a 3D chart)- The gains
are too good to be true (1000,000,000%)- If you think you found the HG
think again- The equity line is straight, almost no drawdowns- The
system only works in recent years- The system doesn't work
out-of-sample- Optimizing parameters vary widely for different time
periods- Greater than 75% winning trades- DrawDowns greater than 50%
for the bare-bone system- The system was tested on only one period-
Less than 30 trades- No out of sample test (can be done backwards)-
Remember that the market has natural Friendly and UnFriendly periods
thatyou can detect by overlaying the equities for as many systems as you
canmuster, if all equities start to dip, the market is becoming
unfriendly.- Consider using the C-Test by William Eckhardt [ See Stocks
& CommoditiesV. 12:5 (218-221): The c-Test by William Eckhardt.]-
Consider the type of parameter you are optimizing.- Do check out opt
values outside of the expected range, there might besurprises out
there.- Consider that some parameters interact and others do not.-
Consider one-by-one optimization and on-shot deals, perhaps try both?-
When incrementally optimizing parameters note that the requirement for
itsfrequency is the same as for trades, if you add a new rule and it
kicks-inonly once in ten years that doesn't mean much, even if your gain
triples.- To compare the effect of incremental system optimizations
overlay theequity curve for each stage of the system (log scale). If
equities track inparallel your enhancement may be insignificant. If the
equity curvesseparate at an upward angle, this means the improvement takes
placegradually, this is more significant.- To analyze the effect of
optimizations you can also plot the Buy/Sellsignals for the various stages
to see where and how differences occur.- Chart each and every
parameter.- ...best regards,Herman.Your
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