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Steve,
You mention creating a basket comprised of
well-behaved issues.
Do you mean issues which behave nicely according to
your system ? I.e. backtest your system and create a basket out of those
that traded in a well-behaved manner (e.g. not just a few home runs with a ton
of losses).
Or is there some other approach ? I'm not
sure how you'd mechanically scan for "orderly" accumulation &
distribution.
I've been grappling with this for a while
!
Thanks,
HB
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
<A title=kernish@xxxxxxxxxxxx
href="">CedarCreekTrading
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Wednesday, February 19, 2003
16:38
Subject: Re: [amibroker] Re: System
Testing Validity
>The other question I asked of no one in particular was
... When doyou know your system has died ? Even with valid thorough
testingsystems sometimes die and systems traders I think have to give
somethought to want would constitute death to a system and then when
theresults for whatever reason approach that what they are going to
donext.Fred,I've thought a lot about "death of a system"
and I believe technicians pointto system failure with little regard to the
change in supply and demandand/or volatility (in the issue that they are
trading). Over-optimized andbad approaches to the markets will
always fail (eventually).Sometimes, really great mechanical approaches
can be compromised by"forcing" the system on issues that have random walk
personalities.Well-behaved issues (trading vehicles that exhibit
accumulation/disturbutionpatterns) can return extrodinary profits for long
periods of time. Changesin supply and demand can cause a stock or
commodity's behavior to changedrastically (and render repeated
losses).Good, solid approaches will always work on a universe of
"well-behaved"stocks or commodities. You can design objective
criteria to pareill-performing issues from any universe. I think
most of us can conjure upa few rules about an issues's behavior and remove
issues that don't performto specific standards.A well-designed
system can trade dozens and dozens of issues witheye-popping
returns. Technicians tend to "force" their approach "favorite"issues
(QQQ's, eminis, MSFT). This is not logical. You can
tradeanything...why not trade orderly issues?That's my thoughts on
"death". Patterns change, but good systems never die.Take
care,Steve----- Original Message -----From:
<fctonetti@xxxxxxxxx>To: <amibroker@xxxxxxxxxxxxxxx>Sent:
Wednesday, February 19, 2003 1:32 PMSubject: [amibroker] Re: System
Testing Validity> Steve,>> I think given the
current environment we are in it is POSSIBLY no> longer absolutely
necessary to be optimizing systems over that long a> time frame.
However, pre 2000 IMHO one would have had to look> farther back in time
then 1983 to see whether or not their system was> viable and again IMHO
at this juncture one needs to look farther back> in time then the
beginning of 2000 to see whether or not they have a> viable system for
exactly the same reason even though it's the bear> that's familiar as
opposed to the environment pre 2000.>> I am not predicting a
bull market as beginning tomorrow at 3:30 or> that we've already turned
the corner etc. only that clearly it will> happen whether it's
tomorrow, next week, month, year, decade or> whatever, I, like Herman
says, could care less. I only want to know> that the systems I
develop and trade work well in good markets and> bad. If they do
fine, if they don't ... NEXT !>> The other question I asked of
no one in particular was ... When do> you know your system has died
? Even with valid thorough testing> systems sometimes die and
systems traders I think have to give some> thought to want would
constitute death to a system and then when the> results for whatever
reason approach that what they are going to do> next.>>
--- In amibroker@xxxxxxxxxxxxxxx, "Steve Davis" <sdavis@xxxx>
wrote:> > Fred,> >> > Please keep your insights
coming. The subject of system validity and> > robustness is
certainly worthy of further discussion. In my case, I> have a>
> SP500 mechanical trading system optimized with historical data
from> 1983 to> > the present. My performance numbers during
the optimzation period> are> > CAR%=16%, MDD%=5.6%. Prior to
the optimization period, the profits> and> > drawdowns are
both larger. Why am I using such a large optimization> period?>
> Because I am cautious and willing to sacrifice profits for lower>
drawdowns.> > Would appreciate your thoughts on proper system
validation> techniques. Am i> > being too cautious?>
>> > My system performance is poor compared to your 100% CAR with
only> 3% MDD.> > Your system performance is far outside my
reach right now.> >> > -Steve> >> >
-----Original Message-----> > From: Fred <fctonetti@xxxx>
[mailto:fctonetti@xxxx]> > Sent: Wednesday, February 19, 2003 2:44
PM> > To: amibroker@xxxxxxxxxxxxxxx> > Subject:
[amibroker] Re: The transcendental use of Data: An> application>
>> >> > So be it ...> >> > The IDEA
I was trying to share was validity of system testing which> >
includes out of sample results and why when this isn't done your> >
likely to find out the hard way. I find it of no particular>
surprise> > that this has no particluar value to discretionary
traders, but then> > I also have no idea why discretionary traders
need/want tools like> AB.> >> > --- In
amibroker@xxxxxxxxxxxxxxx, "Jayson" <jcasavant@xxxx> wrote:> >
> Fred,> > >> > > This is exactly what endears
Dimitris to many of us here. He has> > provided> > >
you all the material needed to run the test your self. He has> >
presented a> > > well thought out argument for why he believes it
holds value.> There> > is no> > > hidden code,
no magic box just the system as he implemented it.> Run> >
your own> > > tests and decide if the approach suites your own
needs. If after> > running the> > > system tests,
optimized to your specifications and run over the> > time
frame> > > you deem necessary, you find his system holds no value
then simply> > move on.> > > If on the other hand you
find some tid bit of it that holds> promise> > in
your> > > eyes then run with it. Improve upon it and then,
please, post your> > > improvements. That is the goal of a group
like this, to share> ideas> > and> > > hopefully
grow from that sharing. Encouraging rather than> > discouraging
this> > > type of sharing is what keeps active groups productive
else all we> > are doing> > > is offering free tech
support for the product.> > >> > > Jayson>
> > -----Original Message-----> > > From: Fred
<fctonetti@xxxx> [mailto:fctonetti@xxxx]> > > Sent:
Wednesday, February 19, 2003 2:18 PM> > > To:
amibroker@xxxxxxxxxxxxxxx> > > Subject: [amibroker] Re: The
transcendental use of Data: An> > application> >
>> > >> > > > Fred, read please my>
> > > <A
href="">http://groups.yahoo.com/group/amibroker/message/34143>
> >> > > Irrelevant ... You continue to very conveniently
skirt the issue.> > >> > > What timeframe was this
optimization for ?> > >> > > Show the results of
trading the same system using the same> > parameters> >
> for some year long out of sample period prior to that.> >
>> > >> > >> > >> >
>> > >> > >> >
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