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Isn't there any worry that by restricting a mech system to
a small basket of selected stocks that you might be doing some extreme
'curve fitting'. This is a question, not a criticism.
Phsst,
I guess that depends on what you call a small basket. My "big basket" has a
gross of stocks in it. I trade the top four dozen ("small basket"?) and
always diversify among twenty issues. Is this curve fitting?
Take care,
Steve
----- Original Message -----
From: <phsst@xxxxxxxxx>
To: <amibroker@xxxxxxxxxxxxxxx>
Sent: Wednesday, February 19, 2003 6:58 PM
Subject: [amibroker] Re: System Testing Validity
> <A well-designed system can trade dozens and dozens of issues with
> eye-popping returns. Technicians tend to "force" their approach
> "favorite" issues (QQQ's, eminis, MSFT). This is not logical. You
> can trade anything...why not trade orderly issues?>
>
> Is it not also true that:
>
> A poorly-designed system can trade dozens and dozens of issues with
> eye-popping returns.
>
> I have always wanted my mech systems to work on the whole market of
> securities. Isn't there any worry that by restricting a mech system to
> a small basket of selected stocks that you might be doing some extreme
> 'curve fitting'. This is a question, not a criticism.
>
> It seems that many here like to apply mech systems to a small subset
> of securities. Is this approach really successful over the long haul,
> or are you constantly 'stirring the pot' so to speak by fitting an
> ever changing basket of stocks to the mech approach?
>
> Regards,
>
> Phsst
>
> --- In amibroker@xxxxxxxxxxxxxxx, "CedarCreekTrading" <kernish@xxxx>
> wrote:
> > >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.
> >
> > Fred,
> >
> > I've thought a lot about "death of a system" and I believe
> technicians point
> > to system failure with little regard to the change in supply and demand
> > and/or volatility (in the issue that they are trading).
> Over-optimized and
> > bad 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/disturbution
> > patterns) can return extrodinary profits for long periods of time.
> Changes
> > in supply and demand can cause a stock or commodity's behavior to change
> > drastically (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 pare
> > ill-performing issues from any universe. I think most of us can
> conjure up
> > a few rules about an issues's behavior and remove issues that don't
> perform
> > to specific standards.
> >
> > A well-designed system can trade dozens and dozens of issues with
> > eye-popping returns. Technicians tend to "force" their approach
> "favorite"
> > issues (QQQ's, eminis, MSFT). This is not logical. You can trade
> > anything...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@xxxx>
> > To: <amibroker@xxxxxxxxxxxxxxx>
> > Sent: Wednesday, February 19, 2003 1:32 PM
> > Subject: [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@x...]
> > > > 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@x...]
> > > > > 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
> > > > > > 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.
> > > > >
> > > > >
> > > > >
> > > > >
> > > > >
> > > > >
> > > > >
> > > > > Yahoo! Groups Sponsor
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> > > > >
> > > > >
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