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Interesting comment Fred, no offence taken. We all have our views of the
market, and how we trade it. I think it also comes to what types of stocks
you trade, and especially your timeframe. You are right, I have not traded a
true bull run, I came in at near the end so I have been told. When I started
I did not even know what a bull run was, thought it meant the bull run in
Spain (?) where people run down the streets with bulls chasing, and I have
seen a bull market in the country towns :)
But I cannot agree with being put into a lemming group. That I do not like.
I shall pass on now what I have done in testing systems, as obviously my
scattered thoughts being put forward are being taken as gospel. I test over
5 year period which has included some very moving volatility of the market
after a good bear run. So testing this period I have covered different types
of market, bull, bear and no where. To further test the final numbers, I
checked this against the previous 5 years data to give a 10 year perspective
on its reliability. Before I traded such a system I then forward tested on
paper, generally for up to 6 months until I am satisfied it is a viable
method. Often the drawdown on systems stops them dead very early. The
backtesting capabilities are ok, but in no way can this ensure viability of
any system when actually traded real time, even if only on paper. I have had
a system over a group of stocks that worked great in backtest, had 4:1
win/loss ratio, good profit returns, and the drawdown (as worked on excel
spreadsheet) was acceptable. The forward trading then had a string of losses
that wiped out the account (paper). Backtesting did not have this number of
consecutive losses, so maybe it was the first time or an abnormal one-off
event. Needless to say, that despite great backtest, it was scrapped.
I continue looking for viable systems, and when I eventually find a good
one, that works for me, great.
Enough from me as I seem to wander around the place and forgotten what I
started to say. :)
Cheers,
Graham
http://groups.msn.com/ASXShareTrading
http://groups.msn.com/FMSAustralia
-----Original Message-----
From: Fred [mailto:fctonetti@xxxxxxxxx]
Sent: Sunday, 30 March 2003 11:47 AM
To: amibroker@xxxxxxxxxxxxxxx
Subject: [amibroker] Re: TESTING THE UNIVERSE ?
Grahm,
No offense, but all I can tell you is that 3 years is hardly enough
time to have experienced the gut wrenching feelings that a lot of
folks felt in their stomachs and their accounts in the market
transition of the late 90's when a dart and a newspaper was
sufficient to make real good dollars on the long side to what
happened to them thereafter. Lots of those folks along with almost
countless market-letters, hedge-funds, companies, mutual funds etc.
etc. have long since disappeared. The bear has been going on long
enough now that there are a variety of folks running around thinking
they only need to test over the last couple to three years and are
virtually heading down the same road as the long gone lemmings of the
late nineties.
Fred
--- In amibroker@xxxxxxxxxxxxxxx, "Graham" <gkavanagh@xxxx> wrote:
> Yes, we are all different, which is why there is someone buying
another
> selling. Without that the market would not be much fun :)
> Regards knowing when your system was working or not, I did say that
you have
> a measure of performance of your system. This would tell you when
not to
> trade that system.
> In a lot of regards to history being easy to see the trends etc,
have to
> totally agree. Then following that thought one step further, just
to throw
> this thought out, what purpose is backtesting. Does history repeat?
Can you
> rely on past charts to help with future price movements? Unless you
go
> further into the reason behind the moves what purpose does the
historical
> performance mean. Why did the price move in that direction at that
> particular time, will that occurrence happen again. Then you have
to ask the
> next question, if it did happen, would it have the same effect on
the price
> performance as it did in the past.
> My previous post, and this, are putting thoughts out. I have my
methods of
> trading, and so far have survived 3+ years. Some times up some
down, but
> surviving. I continually have ideas and delve into them, most of
the time
> they are left behind as they do not stand the process of testing.
>
>
> Cheers,
> Graham
> http://groups.msn.com/ASXShareTrading
> http://groups.msn.com/FMSAustralia
>
> -----Original Message-----
> From: Fred [mailto:fctonetti@x...]
> Sent: Sunday, 30 March 2003 11:19 AM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] Re: TESTING THE UNIVERSE ?
>
> Grahm,
>
> Questions and/or comments regarding your post.
>
> If you are only trading long then to me it's still imperative to
test
> over bear markets as well unless you have some sort of automated
> filter that keeps you out of bear markets in which case you are
still
> testing over bear markets, aren't you ? It's wonderful to look
back
> in history and say ... well I wouldn't have traded then because it
> was a bear market ... but the question is when did you recognize
that
> it was ? after day one ? month one ? year one ?
>
> The same applies to delisted stocks, doesn't it. No way to know
much
> in advance that they were going to be delisted.
>
> With regards to holding period .vs. testing period IMHO neither 10
> years for those planning to hold 12 months or 1 year for those
> planning on holding 5 days is sufficient although the latter
appears
> to be more viable as there are ~50 potential trades there and only
10
> in the first scenario. From my porch I don't trade systems that
> don't have 200+ trades in them end to end.
>
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Graham" <gkavanagh@xxxx> wrote:
> > I don't see the need for testing multitudes of stocks that no
> longer exist
> > nor for testing over large periods of time, nor having a large
> basket of
> > stocks available on your search list.
> >
> > As far as I see all you need is a timeframe to cover various
market
> trends
> > (bull/bear/sideways) and enough stocks to make it viable. I would
> also look
> > at how you trade, long only, or long and short trades, etc. If
you
> only
> > trade long, why test over a bear period. Logic would tell you
that
> your
> > system will not be as profitable, and thus you should maybe stand
> aside till
> > your system matches the market. Your keeping of records against a
> certain
> > criteria of win/loss ratio, or profit/loss ratio would tell you
> when your
> > system is out of synch with the market. Either you have multiple
> systems or
> > keep adjusting the one system to suit current conditions would be
> options.
> >
> > The stocks you select for the testing should be consistently
traded
> > throughout your test period, so I ignore any that closed or
started
> during
> > the period. Your timeframe of testing should also be in line with
> your
> > trading timeframe. The test period should be longer than your
trade
> > timeframe. I can only make a stab at this as I have only tested
to
> suit my
> > style, but if you intend to hold for 12 month periods, then you
> test over a
> > 10 year frame, or for holds of 5 days, I would think that a test
> over 12
> > months would be sufficient.
> >
> > The size of your stock basket for systems should be related to
your
> trading.
> > A small short-term trader can only manage a relatively small
number
> of
> > trades at one time due to size of capital, and the human ability
to
> manage
> > them. A larger trader/investor would have a different aspect
being
> able to
> > manage a larger basket due to more capital, and a longer term
> perspective
> > easier to manage more trades. So if you can only manage 2 trades
> per week,
> > why have a system that provides 20 entry signals weekly. A trader
> who makes
> > 20 trades per week would need a system to signal more than 2, but
> would not
> > need 100 signals each week. So you would need to combine the
number
> of
> > stocks to search and the trade signal system to match your
> requirements.
> >
> > At the end of all this nonsense I have said, there is one thing
> that really
> > counts. The methods and systems you use for trading must be
> suitable for you
> > personally. What one person does will probably not suit another.
> >
> > Cheers,
> > Graham
> >
> > <http://groups.msn.com/ASXShareTrading>
> > http://groups.msn.com/ASXShareTrading
> >
> > <http://groups.msn.com/FMSAustralia>
> http://groups.msn.com/FMSAustralia
> >
> > -----Original Message-----
> > From: Jayson [mailto:jcasavant@x...]
> > Sent: Sunday, 30 March 2003 7:30 AM
> > To: amibroker@xxxxxxxxxxxxxxx
> > Subject: RE: [amibroker] TESTING THE UNIVERSE ?
> >
> >
> >
> > Gosub,
> >
> >
> >
> > there will certainly be many on the other side of this discussion
> but FWIW I
> > try to define a universe that will trade best with a given
> strategy. For
> > instance my universe has certain price, average volume and market
> cap
> > requirements. I agree that some stocks have certain personalities
> that tend
> > to work best with certain systems. Others will argue that a
Robust
> system
> > should work equally well in any market. The challenge with the
first
> > approach is that depending on how far back you you are testing the
> > personality may be very different now than it was at the start of
> your
> > testing period, especially if you test back 10+ years. Look at
> MSFT, AOL and
> > CSCO as examples....
> >
> >
> >
> > Jayson
> >
> > -----Original Message-----
> > From: gosub283 [mailto:gosub283@x...]
> > Sent: Saturday, March 29, 2003 5:28 PM
> > To: amibroker@xxxxxxxxxxxxxxx
> > Subject: [amibroker] TESTING THE UNIVERSE ?
> >
> > Hi everyone,
> >
> > Please bear with me on this subject because
> > it's one which I have not yet found the answer
> > and one which I am not an expert. This question is based
> > on my current assumptions and is open to comment,
> > correction, or debate.
> >
> > (This has been discussed before but, as an onlooker,
> > I did not see a solution.)
> >
> > Here it is:
> >
> > What is the point of testing the whole universe
> > of stocks with a trading system if it is generally
> > understood that..
> > A) Some stocks are just not "system" tradeable
> > B) Some systems are best suited to certain markets.
> > C) Some stocks have unique "personalities" which work
> > with some trading techniques but not others.
> >
> > It seems to me that a test of the whole universe will give
> > a squewed result because the performance of the system
> > will be lowered by the "untradeables" and the ones with
> > the "wrong personality".
> >
> > I have written filters which divide up the universe into two
> > personality groups.(Good ones on the left...bad ones on the right)
> > This has helped to narrow down the basket a little.
> > But maybe there's another reason to test the whole universe
> > that I m not aware of. Any comments on this ? (for or against)
> >
> > PS: I think the focus should be on devising ways to define
> > and catagorize "personalities", then go exploit them.
> > (Definately easier said than done) ;-(
> >
> > Cheers,
> > Gosub283
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> > Send BUG REPORTS to bugs@xxxx
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