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Hi, Sam:
I don't want to beat a dead horse, and I hope Herman is not reading this,
but you can protect yourself against a 40% decline in equity using proper
position sizing and money management techniques. Enough about MM. Your
observation is what makes me nervous. Just because a stock behaves well in the
past doesn't necessarily mean that it will always give the same good trades. A
continuing effort at finding those stocks that do behave well in your system is
indeed a challenge. Maybe concepts like the fractal efficiency ratio may be
helpful in this instance. It's just a thought, but it's worth a try.
Regarding Kaufman's book, I have to chuckle a bit. I've never read the
book. I was quoting another trader who had quoted Kaufman. However, I've heard
it is a fine book.
Al Venosa
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
samgrayy
To: <A title=amibroker@xxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Friday, November 01, 2002 11:33
AM
Subject: [amibroker] Re: a few
considerations about optimization
Al this is a very interesting topic. Often, as
well, from my testing I noticed that a system will not work well witha
given security during some intervals. So the character of trading has
shifted. The question is that one is running a system that was
working well. Then in a very short time, the system loses 40% of equity in
a few consecutive losing trades. How do we protect ourselves against
that.Keep posting the good ideasSam (Al ..I take it you
recommend the Perry Kaufman book ??)--- In amibroker@xxxx, "Avcinci"
<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 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 firepoweron 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 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,> > Franco>
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