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Thanks Al ..
You are right .. I have read about MM but have never implemented it.
I am somehow restriced by the higher commisions in Canada .. So you
have to have an initial stake of 20 k or so to trade something without
being impoverished by commisions.
Back to the efficiency ratio. I noticed that adding it to the system
reduced the maximum system drawdown to 25% from 35% range for the
securities I was looking at .. While this is high.. I don't mind
taking a 5 K loss on 20K in Capital (as long as it doesn't happen
often..)
Right now I don't trust my system. I have to make a judgement call
everytime I see a signal.
I am just learning. Even one of the systems which was devised by
Stridsman (the Bollinger Band system ..) tests alright on the $SPX til
1998 from the 1988 . It fails thereafter. So I need to keep looking to
see.
I will for now stop system development and focus on scanning (The
Explore and ATC functionalities.) . I think if I know which sectors
are doing well and which companies posses good relative strength, then
my task will be easier.
I am digressing so I'll send this now ..
Sam
--- In amibroker@xxxx, "Avcinci" <avcinci@xxxx> wrote:
> 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
> ----- Original Message -----
> From: samgrayy
> To: amibroker@xxxx
> 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 with a 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 ideas
> Sam
>
> (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 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 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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