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Franco,
Recently I was talking to a professional trader who told me that some
stocks simply don't behave well in any system and others do extremely well (in
backtesting). He attributes this to a term called the "fractal efficiency
ratio," coined by Perry Kaufman. A stock has to have some non-random
movement to be predictable. It's the total change in price over a given
period, divided by the sum of the absolute values of all the daily changes in
price. If a stock has too small a directional component, then it's a poor
candidate for any system, regardless of how many filters or refinements you
add. You're better off using all that firepower on a better target. I've
been testing a lot of stocks lately individually, finding that many simply give
very bad backtest results and very non-robust parameter coefficients. So, I
eliminate them from my watchlist and concentrate on those stocks that behave
well. This seems to be working well. I haven't had time to write any code yet to
see if the good-performing stocks have a higher fractal efficiency ratio
(personality as you call it?) than the poor performing ones, but it's
worth a try. You must test over a long enough period of time to encompass
bullish, bearish, and sideways markets, like 1/1/97 (or even earlier) to
present time. If you try this idea out, let me know how successful you are.I'm
very interested in this concept. When I get a chance, I'll try it myself. But,
in theory, it seems to have merit.
Al Venosa
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
Franco Fornari
To: <A title=amibroker@xxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Friday, November 01, 2002 6:15
AM
Subject: [amibroker] a few considerations
about optimization
Hello,
trying to optimize any trading system, Ithink we
all have thought, sometime, we would like to avoid such a tedious processor
to do it once and for all.
It could be possible? This question badgered me
for a long time, unfortunately with no success, yet I feel there must be a
solution.
Why I say that? Because a peculiarity of
each stock, called "personality" by someone, wich seems stable enough. In
other words, I think if we were able to mathematically represent this
characteristic, we could automatically optimize any trading
systems.
But, the big matter is: what is this
characteristic (long term volatility, frequency of peaks and troughs, price)?
How could we assess or measure it? And, first of all, does such a
feature exist or is it only a mirage? How do you think
about?
Best regards,
FrancoPost
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