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Thanks, Jayson. That's pretty interesting. I wasn't aware of Hannula's
Polarized Fractal Efficiency or your AFL code of it. I'll have to take a look at
it. It seems conceptually similar to Kaufman's FER. Tharp uses volatility (ATR)
to help define efficiency, but when you think about it, all of these
representations are similar in that they describe the fastest route from price A
to price B in one way or another.
Al Venosa
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
<A title=jcasavant@xxxxxxxxxxxx
href="">Jayson
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Sunday, March 30, 2003 6:47
PM
Subject: RE: [amibroker] Re: TESTING THE
UNIVERSE ?
<SPAN
class=619104623-30032003>Gosub,
<SPAN
class=619104623-30032003>
for
an indicator based representation of PFE you may visit....
<SPAN
class=619104623-30032003>
<A
href="">http://www.amibroker.com/library/detail.php?id=231
Jayson
<FONT face=Tahoma
size=2>-----Original Message-----From: Al Venosa
[mailto:advenosa@xxxxxxxxxxxx]Sent: Sunday, March 30, 2003 11:16
AMTo: <A
href="">amibroker@xxxxxxxxxxxxxxxSubject:
Re: [amibroker] Re: TESTING THE UNIVERSE ?
Hi, Gosub:
I've written on this subject before in this forum. There are several ways
you could approach the problem of defining efficient stocks. A stock has to
have some non-random movement to be predictable. Perry Kaufman calls
this the "fractal efficiency ratio" or FER. 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. So, using Kaufman's FER is one way. Another is
Van Tharp's efficiency index (EI), which he introduced about a year ago on his
forum. It is simply the difference in closing price between today and
x-periods ago divided by the ATR over the same period (note how similar in
principle it is to Kaufman's). He uses several periods to define his
efficiency rating. Although he never defined it mathematically, I figured it
out and coded it in afl. There are basically 2 efficiency index periods, short
term and long term. You may change these in whatever way you want and use them
however you want. I'm just showing an example. Here is the exploration code:
Filter=1;//filter on all stocksEI20=(C-Ref(C,-20))/MA(ATR(1),20);
//he uses a simple ma of the true range rather than Wilder's
ATREI45=(C-Ref(C,-45))/MA(ATR(1),45);EI90=(C-Ref(C,-90))/MA(ATR(1),90);EI180=(C-Ref(C,-180))/MA(ATR(1),180);ShortTermEI=EI20+EI45;//short
term sum of EI20 +
EI45AvgEI=(EI20+EI45+EI90+EI180)/4;AddColumn(EI20,"ei20",1.2);AddColumn(EI45,"ei45",1.2);AddColumn(EI90,"ei90",1.2);AddColumn(EI180,"ei180",1.2);AddColumn(AvgEI,"AvgEI",1.2);AddColumn(ShortTermEI,"ShortTermEI",1.2);
The AvgEI should be > 0 (perhaps as high as 15, but you can play with
this). The ShortTermEI can be set to whatever you want, also. Obviously, you
can optimize these terms. In your "price volatility" definition, this is the
antithesis of an efficient stock as defined above. Your "overall market
volatiltiy" is closer in line with the above discussion. This whole idea of
"personality" of stocks is why I am a believer is optimizing a system on a
stock-by-stock basis rather than over an entire watchlist of stocks. The
latter may give you an indication of overall robustness, but the parameter
values derived from such an optimization are influenced by bad personality
stocks as well as good personality stocks. Why should your system be
influenced by stocks that don't behave well? You're not going to trade all 100
NDX stocks anyway nor certainly those that are poor performer to begin with.
Probably the max number of stocks you will trade is a dozen or so, probably
less. So, why not optimize on each of those dozen stocks separately? As long
as the system is robust for each stock, that's all that matters. Just my
opinion.
If you make any progress with further refinements in stock personality,
please post as this has always been of interest to me.
Al Venosa
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
gosub283
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Sunday, March 30, 2003 10:34
AM
Subject: [amibroker] Re: TESTING THE
UNIVERSE ?
Hi AL, (and everyone else)Great thread so far.
Thanks for all the replies.Al, does your definition perhaps describe
the perfectsideway's market ? Lots of steady price moves but nogreat
change in overall volatility?Your comment touches the real reason
why I posted"TESTING the UNIVERSE" in the first place.If it is
possible to somehow isolate and catagorizestock personalities or
efficiencies, then this is anarea where we could really benifit.(I
realize this is easier said than done).On the subject of efficiency,
your definition doesmatch earlier ones that I have seen. Volatility
is the tricky one.A stock's 1 month volatilty may look low, but that
samestock may have a very high volatility when looked atover 1 year.
(I know I'm stating the obvious) So, whentrying to define "personality"
a timeframe must be considered.I try to use at lease 1 year of data to
judge a personality.Anything less may be non-repeatable. Due to
evolution andcompany changes in size/volume/growth over time,
anythingmore than 3 years may also be useless. Back to efficency for
a moment....This could be a very usefull filter.In an attempt to
design one in the past, I sent a questionto S&C magazine (it's in
the Nov. 2002 issue) Titled"Volatility Defined". They did not provide a
satisfactoryanswer to my question. You see, it's possible to
have...A)a very high Average True Range (ATR) value while a
stock moves in a FLAT mode. (What I call "price
Volatility")B)it's possible to have a very low ATR and have the
stockmake huge gains/drops over a given period.(What I call "Overal
Market Volatility")Both describe high volatility, but are quite
diferent??(If you happen to have the magazine, it shows
extemeexample in charts. I'll try to fine .jpg copies)One may
suit a particular trading system more than another.Here's the
end....finally :-0 (Yawning)I think "personality definition"
is a small niche that wouldhelp some trading systems to define better
targets. If anyone has more suggestions on this subject, pleasepost
them. By the way, this is as far as any other discussion got
onpersonality definition, then they stopped. It's possible thatthere
is no more than this. That perhaps, I'm suggestingthe catagorization of
randomness ? Soemtimes, my philosophicalmusings are killed by the pure,
cold reality of math and
chaos.Cheers,Gosub283--- In
amibroker@xxxxxxxxxxxxxxx, "Al Venosa" <advenosa@xxxx> wrote:>
Gosub, > > If I may butt in for just a moment. An "efficient"
stock in my mind is one that participates in large price moves with very
little concurrent movement in its volatility. It's not necessarily a low
volatility stock; it's the fact that the change in price of a stock
over a certain period is disproportionately higher than its
corresponding change in volatility. > > Al
Venosa> ----- Original Message ----- >
From: gosub283 > To: amibroker@xxxxxxxxxxxxxxx
> Sent: Saturday, March 29, 2003 7:26
PM> Subject: [amibroker] Re: TESTING THE UNIVERSE ? (for
GoSub)> > > > >
> -----Original Message----->
> From: gosub283 [mailto:gosub283@xxxx]>
> 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>
> > > > >
> > > > >
> > > > >
> > > > >
> > > >
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