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Dave,
<SPAN
class=626242917-29092003>- sorry to ask, but can you explain the scatter plots
on slides 3 and 4? what exactly is plotted on x and y? the punch line, which I'm
too ignorant to see, is that the system fails with out of sample data. the one
part I understand, I think, is that the correlation coefficient, presumably
between in and out of sample results, is poor. right? how does the plot show
this?
Please ask Dave directly. I don't want
"interpret" his material. A few group members have had this presentation
for a day or so and some or all of the presentation is beyond most of our math
capabilities. I took notes during the presentation... after I quaffed a
couple of pints at the local pub.
<SPAN
class=626242917-29092003>- slide 24 mentions "Trend Following on Commodities",
as "100 day lookback, trade 34% before breakout". I don't understand what this
means. something about MA or EMA(100), maybe, but what's the 34%
piece?
<SPAN
class=626242917-29092003>
I believe Dave trades nine
commodities with a modified "Turtles/Aberration system". Since, the system
only works on commodities and doesn't begin to fit my style or preference, I
have never sought to understand the rules. I have enough trouble
remembering my own boundaries. Sorry.
<SPAN
class=626242917-29092003>- how would I compute the daily standard deviation of
the S&P500 in AB, in a way that gives the same .95%/day figure he mentions?
I ask so I can generate similar figures for other markets.
<SPAN
class=626242917-29092003>
Another Dave
question.
<SPAN
class=626242917-29092003>- the parameters I get
optimizing today compensate for transient market behaviors that will eventually
end, and eventually it will do very poorly. but if those behaviors persist, at
least somewhat, for a little while, might the system to do better than
average in the short term? if so, is constant re-optimization worth
exploring?
<SPAN
class=626242917-29092003><SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>Lot's of things to
consider here. This is probably the real "meat" of the optimizing
issue. One of the biggies is the number of variables when you conduct your
optimizations. The fewer the variables, the less chance that
eventually an approach will do poorly.
<SPAN
class=626242917-29092003><SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>The equity and commodity
markets are not horse races: these "bets" are not handicapped with
assigned odds. Seems to me that since all the horses in the race are
"even-money", one should chart the "form" and only bet on the ponies that have
performed the best (over the most recent period of time).
<SPAN
class=626242917-29092003><SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>Expecting a particular
stock to test well with data from 1997 is foolish. Expecting a particular
system to trade well in 1997 is not foolish. Issues fall into and out of
patterns of accumulation and distribution. Sometimes, supply and
demand takes a trip down "random walk street". I think it makes
sense, if you have a sound approach to the markets, to concentrate on "ranking"
issues based on return. If you concentrate your efforts on selecting
issues that have consistently performed with your systems parameters, the odds
favor continued consistency. If supply and demand changes it's character
for a particular issue...you must stop trading it.
<SPAN
class=626242917-29092003><SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>I believe, constant
reoptimization is the way to go. What is the definition
of constant? For me, I reoptimize every quarter. Most of the
time, reoptimization does not mean a reassignment of triggers or filters.
Most of the time, it means adjusting WHAT I'm trading (adding and subtracting
issues in my universe)...not HOW I'm trading.
<SPAN
class=626242917-29092003><SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>Please share if Dave
responds to your questions,
<SPAN
class=626242917-29092003><SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>Take
care,
<SPAN
class=626242917-29092003><SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003><SPAN
class=626242917-29092003>Steve
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
Dave Merrill
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Monday, September 29, 2003 12:07
PM
Subject: RE: [amibroker]
Optimize/OverOptimize
<SPAN
class=626242917-29092003>thanks very much for this steve. very interesting,
though I don't get all of it. a topic I'm thinking about pretty much
constantly these days.
<SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>a couple of questions, if I
might...
<SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>- sorry to ask, but can you explain the scatter plots
on slides 3 and 4? what exactly is plotted on x and y? the punch line, which
I'm too ignorant to see, is that the system fails with out of sample data. the
one part I understand, I think, is that the correlation coefficient,
presumably between in and out of sample results, is poor. right? how does the
plot show this?
<SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>- slide 24 mentions "Trend Following on Commodities",
as "100 day lookback, trade 34% before breakout". I don't understand what this
means. something about MA or EMA(100), maybe, but what's the 34%
piece?
<SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>- how would I compute the daily standard deviation of
the S&P500 in AB, in a way that gives the same .95%/day figure he
mentions? I ask so I can generate similar figures for other
markets.
<SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>- the parameters I get optimizing today compensate
for transient market behaviors that will eventually end, and eventually it
will do very poorly. but if those behaviors persist, at least somewhat,
for a little while, might the system to do better than average in the short
term? if so, is constant re-optimization worth exploring?
<SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>thanks again for passing this on. makes me wish I
lived somewhere nearby...
<SPAN
class=626242917-29092003>
<SPAN
class=626242917-29092003>dave
<BLOCKQUOTE
>
<FONT face=Arial
size=2>Dave is an Agilent, triple-degreed, engineer. Two weeks ago, he
presented this work to our Denver Trading Group's weekly meeting (actually,
this group meets every Thursday and most Saturday's). Once a
month, I moderate a SIG on mechanical trading (and I haven't
seen less than eighty people in the room since I've been
attending).
Although, I don't agree with certain aspects of
his presentation and I somewhat object to his assigning my name to the
"Karnish System" (it has become a
bastardized off-shot of my work), I still believe that there is a lot of
merit to aspects of his work. The "Karnish System" has become the
moniker for systems (along the front range of Colorado) that
stochastically smoothes a momentum oscillator that initiates buy and sell
signals using symmetrical triggers.
I neither want to endorse, defend or criticize
Dave's work...but, offer this for group members to stimulate
thought.
Take care,
SteveSend
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