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Richard,
I was not referring to the way stocks react to news events. I was talking
about how some stocks simply do poorly in backtesting, offering a theoretical
reason, based on Kaufman's work, for the lack of good behavior in backtesting.
This price behavior, which occurs every day, seems to be true for these
stock over long periods of time (10 years or more). They are simply poor
candidates for trading. You may be right about backtesting being adequate to
control this. In fact, that's what I have done so far. But much of the tedium of
backtesting a list of 1000 stocks or more might be relieved if one could devise
a filter prior to testing all those stocks to come up with a shorter list of
stocks that are already good candidates for trading.
Al Venosa
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
Richard
Harper
To: <A title=amibroker@xxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Friday, November 01, 2002 11:13
AM
Subject: Re: [amibroker] Re: a few
considerations about optimization
There will always be "fractal" (discontinuous)
events in any market. However, I believe the "average"
way a stock responds to a non-predicted "event" is dependant on
characteristics which are variable between stocks. A simple exampleis
average volume. One could theoretically encode the principles. As
the average trader gets smarter (this is happening, leveraged by
computers) it may be necessary. At this time, it is not
necessary. In any event, backtesting is adequate to control
this. 911 was an event. Including it would be one way to
empirically assess an event.
Richard
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
goldfreaz
To: <A title=amibroker@xxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Friday, November 01, 2002 6:24
AM
Subject: [amibroker] Re: a few
considerations about optimization
Interesting...delta=C-Ref(C,-1);md=MA(delta,45);MAd=MA(abs(delta),45);Graph1=MAd;Graph1Style=1;Graph1Color=colorGreen;---
In amibroker@xxxx..., "Avcinci" <<A
href="">avcinci@xxxx...> wrote:> 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 stockhas
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> > ----- Original Message -----
> From: Franco Fornari > To:
amibroker@xxxx > Sent: Friday, November 01, 2002 6:15
AM> Subject: [amibroker] a few considerations about
optimization> > > Hello,>
> trying to optimize any trading system, I think we all
have thought, sometime, we would like to avoid such a tedious process or
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 Isay
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? Howdo
you think about?> > Best regards,>
> Franco>
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