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Re: [amibroker] Optimize/OverOptimize



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<FONT face="Courier New" color=#0000ff 
size=2>am I understanding you to be saying that the main way you optimize is to 
confine relatively static scans to a watchlist of things that have been 
performing well lately with your system? 
<FONT face=Arial 
size=2> 
yep...lately meaning 
approximately a year
<FONT face=Arial 
size=2> 
<FONT face=Arial 
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<BLOCKQUOTE 
>
  ----- Original Message ----- 
  <DIV 
  >From: 
  Dave Merrill 
  
  To: <A title=amibroker@xxxxxxxxxxxxxxx 
  href="">amibroker@xxxxxxxxxxxxxxx 
  Sent: Monday, September 29, 2003 1:16 
  PM
  Subject: RE: [amibroker] 
  Optimize/OverOptimize
  
  <SPAN 
  class=616475318-29092003>thanks for answering steve, and apologies for asking 
  you to interpret dave's stuff. you were handy (:-)... I'll post anything 
  interesting if dave is able to reply.
  <SPAN 
  class=616475318-29092003> 
  <SPAN 
  class=616475318-29092003>I agree in principle that constant adjustment is the 
  way to go. I just posted a long msg to the VectorVest group to the effect 
  that real life effectively *is* a walk-forward optimization. any parameters 
  you're presented with today result from tests on earlier data, not some 
  eternal truth, and this process of evolution can't stop.
  <SPAN 
  class=616475318-29092003> 
  <SPAN 
  class=616475318-29092003>am I understanding you to be saying that the main way 
  you optimize is to confine relatively static scans to a watchlist of things 
  that have been performing well lately with your system? it's interesting, I 
  was working on a system that appeared to do much better than average over a 
  wide range of issues, and the best predictor of future success I found was 
  past success. had to trash it because it turned out the nice returns were due 
  to accidentally peeking into the future a bit, but the optimization principle 
  made a lot of sense to me.
  <SPAN 
  class=616475318-29092003> 
  <SPAN 
  class=616475318-29092003>thanks again,
  <SPAN 
  class=616475318-29092003> 
  <SPAN 
  class=616475318-29092003>dave
  <BLOCKQUOTE 
  >
    <FONT face=Arial 
    size=2><FONT face="Courier New" 
    color=#0000ff size=2><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>SteveSend 
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