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Phsst,
Those of us who can't relate to testing based on fixed position sizes
with fixed numbers of positions can't because they mask true system
returns and dd's. When and if someone provides a description of how
this is not so we would be happy to think about it otherwise.
--- In amibroker@xxxxxxxxxxxxxxx, "Phsst" <phsst@xxxx> wrote:
> Chuck,
>
> I've been keeping 'grandkids on steroids' today, so I am a little
> punch-drunk. I've read all the posts on this thread and have a
couple
> of comments.
>
> Your database goes back to '85. As I relate to my own situation, my
> average Positionsize in '85 was only a fraction of my Positionsize
> today. I've been backtesting since the late 80's, and have used
VOLUME
> for two (2) purposes... (1) to gauge price action, and (2) to gauge
> liquidity as it related to MY POSITION SIZE. On the second count, as
> my personal positionsize increased, so did the average volume in the
> markets.
>
> As mentioned in subsequent posts on this subject, I've filtered both
> my backtests and my actual trades based upon a volume multiple of my
> Positionsize as opposed to x# of shares traded per day, irrespective
> of price.
>
> You and I have both stated that we backtest based upon 'fixed
position
> size'. And yet other people are not able to relate to that. They
seem
> to think that everyone 'compounds' their trades on a daily basis
> depending upon their account size growth or demise as a direct
result
> of trading results. The truth (for me) is a compromise... As my
> account size grows(whether thru trade profits or savings) I
gradually
> increase my Positionsize, but it is not directly proportional to
> trading success.
>
> So in my mind, increases in actual market trading volume are just
> about proportional to increases in my own account size, and are
> therefore a 'non-issue'.
>
> Another issue for me is your multiple posts relating to prefering
> non-split adjusted data.
>
> Every time you've mentioned your preference for 'non-split adjusted
> data', I've chosen to ignore the subject rather than to open it up
as
> an issue.
>
> But it is time to ask the crucial question... if you really use
> non-split adjusted data, how do you account for stock splits in your
> backtest results where a 2 for 1, or 3 dor 2, or 4 for 5 stock split
> has occurred. For example if your system generates a trade when the
> stock price is at 50, and a 2 for 1 split occurs dropping the price
to
> 25 (reducing your position by one-half), how in the heck do you
> account for the price reduction which did not REALLY account for a
> loss in your 'real life account' but which devasted your backtest
results?
>
> Just curious.
>
> Phsst
>
>
>
>
>
> groups.com, "Chuck Rademacher" <chuck_rademacher@x> wrote:
> > I was about to send this email to "b", but I would welcome
comments from
> > anyone else interested in such historical work.
> >
> > At the risk of having some of you ask why it matters, my
backtesting
> > generally goes back to 1985. Just yesterday, I posted a message
> to this
> > group saying that I always use one set of parameters across all
> stocks and
> > across all timeframes. One of the downsides of this approach
> (perhaps) is
> > that volume has changed over time. I suppose that one could
argue that
> > volatility changes over time as well. Volatility, however, goes
> through
> > cycles and volume just keeps growing.
> >
> > The question that I have involves volume filtering. To me, it is
> essential
> > that volume filters be applied to actual volume and not
backadjusted
> volume.
> > My concern, however, is that if I apply a filter requiring an
average of
> > 300,000 shares, I don't get very many hits back in the late 80's
and
> early
> > 90's.
> >
> > I have a solution in mind and would appreciate some input or
> dialogue on the
> > subject. It seems to me that volume filtering should be based
on some
> > percentage of the total volume of all NYSE stocks (for
instance). I
> > haven't done my homework yet, but let's say that the average
volume
> today is
> > ten times more than it was in 1985. If I decide to filter today
at
> 300,000
> > shares, wouldn't it make sense to filter based on 30,000 shares in
> 1985. I
> > can probably answer that question myself by saying that I don't
> think 30,000
> > would be an adequate filter in 1985. But I could scale it from
> 100,000 to
> > 300,000 progressively between 1985 and 2003 based on mathematical
> equation.
> >
> > You may ask why backtesting to 1985 (or any other date) is
important.
> > There are dozens of reasons, but the most important reason to me
is that
> > prospective investors in any funds that I manage want to see how a
> proposed
> > system would have performed over a statistically meaningful period
> of time.
> > You can argue about the relevance of such information, but THEY
> EXPECT TO
> > SEE IT. For the record, I also think that it is very important.
> >
> > I welcome comments from anyone with an interest or knowledge in
this
> area.
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