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RE: [amibroker] Robustness testing & Over-optimization checklist



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A very 
important item is missing: Equity curve analysis. I guess Perry didn't have 
AmiBroker at the time ...
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<FONT face=Arial color=#0000ff 
size=2>herman

  <FONT face=Tahoma 
  size=2>-----Original Message-----From: HB 
  [mailto:hossamb@xxxxxxxxxxxx]Sent: Saturday, September 27, 2003 
  3:11 AMTo: amibroker@xxxxxxxxxxxxxxxSubject: [amibroker] 
  Robustness testing & Over-optimization checklist
  Hello,
   
  I recall someone asking about over-optimization 
  and robustness testing.  Here's an excerpt from...
   
  Book: "Smarter Trading: Improving Performance in 
  Changing Markets"
  
  Chapter: Making a Strategy 
  RobustAuthor: Perry Kaufman
   
  CHECKLIST FOR ROBUST TESTING
  PART 1: Deciding What to Test<FONT 
  face=Arial size=2>
  1. Is the strategy logical?2. Can you program all the 
  rules?3. Does the strategy make sense only under certain conditions?4. 
  Take a guess as to the expected results.
  PART 2: Deciding How to Test
  5. Choose the testing tools and method.6. Do you have enough of the 
  "right" data?7. Have you Included realistic transaction costs?8. Will 
  you test a full range of parameters.9. In what order will the parameters 
  be tested?
  10. Are the parameters distributed properly?11. Have you defined the 
  evaluation criteria?12. How will the output be presented?
  PART 3: Evaluating the Results
  13. Are the calculations correct?14. Were there enough trades to be 
  "significant?"15. Does the trading system produce profits for most 
  combinations of parameters?16. Did logic changes Improve overall test 
  performance?17. How did it perform on out-of-sample data?
  PART 4: Choosing the Specific Parameters to Trade
  18. Did the last test include the most recent data?19. Did you choose 
  from an area of broad success?20. Are profits distributed relatively 
  evenly over the tested history?21. Are the profits per trade large enough 
  to absorb errors?22. Did the historic results show any large losses due to 
  price shocks?23. Have you risk-adjusted the returns to your 
  acceptable
  PART 5: Trading and Monitoring Performance
  24. Are you following the same rules that were tested?25. Are you 
  trading the same data that was tested?26. Are you monitoring the 
  difference between the system's actual entries & exits?
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