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Sam,
Don't take this message as patronizing. I'm only offering advice basedon
what I've learned over the last 12 months or so. You should not be so quickto
be so accepting of such a huge drawdown. Losing $5 K out of $20 K is huge. You
could easily go to ruin in a very short time period. Based on your statement
that you don't trust your system, you are not ready to trade yet. I certainly am
not, and I've been backtesting and developing ad nauseam for over 12 monthsnow.
You should have a very high degree of confidence in your system before commiting
real money. The market is not trending right now, so you have lots of time to
develop your system, read books, take courses, etc. Use it wisely. This board is
an excellent resource to learn system development and TJ's great program. You
should also visit Van Tharp's and Chuck LeBeau's forums to get different views,
too. And don't forget the turtletrader web site. Good luck.
AV
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
samgrayy
To: <A title=amibroker@xxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Friday, November 01, 2002 3:48
PM
Subject: [amibroker] Re: a few
considerations about optimization
Thanks Al ..You are right .. I have read aboutMM
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 $SPXtil
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, findingthat
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 > testover
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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