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I don't think this is a math question per se. If you are using
multiple indicators as a voting system or as a scaling up/down system
and those indicators do NOT have a high degree of correlation then
this is probably a good thing, if they do it probably isn't.
--- In amibroker@xxxxxxxxxxxxxxx, "Ken Close" <closeks@xxxx> wrote:
> Fred: thanks, and I realize what you say is true. My question was a
> mathematics one---is it reasonable to expect dd to decrease when
added
> components are brought into a combination signal?
>
> Seems like something that says that stnd dev of averages are less
than
> the stnd dev of the components of the averages is at work....
>
> Ken
>
> -----Original Message-----
> From: Fred [mailto:fctonetti@x...]
> Sent: Sunday, April 13, 2003 5:11 PM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] Re: Real World Systems - Multiple Sub Signals
>
> Ken,
>
> Multiple sub-signals as it were have long been around and are
> typified by Ultra Systems software. If you think about it even
> simple systems like RUTTR use this principle in that the MACD &
> Stochastic must agree. This concept can be used a lot of different
> ways. It can be used as a voting system like RUTTR does where
there
> must be a unanimous vote before taking action or it can be used to
> decide to what level one should be invested i.e. 25%, 50% 100% etc.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Ken Close" <closeks@xxxx> wrote:
> > Multiple Sub Signals: - here is a real world trading approach
that
> I
> > have never seen mentioned here. I would like to get some
reaction.
> > This is based on some real world trading that is happening on
> another
> > platform that I am helping port over to AB.
> >
> >
> >
> > The idea is to have signals for multiple subsystems and then take
> your
> > trading signal when a majority of the subsignals "line up".
> >
> >
> >
> > For discussion purposes, visualize a mov avg cross over AND
> >
> > A volume oscillator AND
> >
> > An advance decline curve AND
> >
> > Perhaps a VIX type signal.
> >
> >
> >
> > If you let each one be a buy or sell, and call each S1, S2, S3, S4
> >
> >
> >
> > then your buy statement could be
> >
> >
> >
> > Buy = S1 AND S2 AND S3 AND S4.
> >
> >
> >
> > This might be a little too stringent, so perhaps you code it to
> give a
> > buy if 3 of the 4 signals are a buy and you do not care which
ones.
> >
> >
> >
> > In the work that I am doing with this approach, I am seeing that
> each
> > S(i) has a return and a dd over a long period of time, but as you
> add
> > combinations of the signals, the return increases a little bit
but
> the
> > dd seems to drop and drop quite a bit. An example might be
returns
> for
> > each one individually of say 8-10% CAR and 13-15% dd, but when 3
> out of
> > 4 are combined as I describe above, the resulting return might be
9-
> 12%
> > CAR and 6-9% dd. These are not barn burners, and those seeking
or
> > actually trading 50-100% CAR systems will laugh as they hit
delete,
> but
> > for some folks who are risk adverse, or managing retirement
> portfolios,
> > or whatever, this kind of approach might have some appeal.
> >
> >
> >
> > In the work I have done so far, there has been NO OPTIMIZATION of
> the
> > parameters within the subsystems. Any In sample period compares
> > favorably with OOS periods. The results look steady over 12
years
> of
> > data, with variations due to changing market conditions. (I am
not
> sure
> > "IS and OOS" apply when no optimization has been done, but what I
> mean
> > is that breaking the total time period up into sections shows no
> real
> > degradation or "blowup" of one period relative to the other.)
> >
> >
> >
> > The details of the subsystems are not the issue here-what I am
> raising
> > is the question of the drawdown dampening effect of the
> combination. Is
> > this a mathematically correct thing to expect? Does moving in
this
> > direction promise dd reduction? Assuming you select subsystems
> that
> > are not highly correlated, should you not expect improvements in
the
> > combination that are not possible in the single subsystems?
> >
> >
> >
> > Any comments? Build-upons? What?
> >
> >
> >
> > Ken
>
>
>
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