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Hello Dave,
For #10, Kaufman is refering to the notion that the majority (68%) of
the range of parameters should be profitable. In a map of parameter
values & associated returns, you want to see a plateau instead of
just spikes. Check out the 3D optimization spreadsheet in the Files
section.
Also, the order of parameters is crucial because you should test the
most importanat variables first, i.e. the ones that cause the largest
changes in your results. Focus on those first and then on the less
important ones
Yes, the book is excellent, not just for the robustness section. I
haven't read his other trading system book yet though so I don't know
if there are similarities.
HB
--- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx>
wrote:
> thanks, I think I made that original request, maybe others too.
>
> what do you make of these:
>
> > 8. Will you test a full range of parameters.
> > 9. In what order will the parameters be tested?
> > 10. Are the parameters distributed properly?
>
> why would you expect profitability for all parameter settings? does
the
> existence of some unprofitable settings invalidate a strategy? what
> difference does the order in which parameters are tested make? what
does #10
> mean?
>
> did you like the book overall? would you say it answers the
robustness
> question well, beyond this checklist?
>
> thanks,
>
> dave
> 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 Robust
> Author: Perry Kaufman
>
> CHECKLIST FOR ROBUST TESTING
>
> PART 1: Deciding What to Test
>
> 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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