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Hi J,
Thursday, October 2, 2003, 7:18:49 AM, you wrote:
e> yes it makes sense. I used a ema that worked well but their near
e> values did not....and when I backtested it with new data the
e> results were not good.. I always use half of the historical data
e> to adjust system (parameters, risk managemnt, etc)..Once I finish
e> (before money management) I ran a backtest and see how would have
e> done in the "future" (with the other 50% percent of historical
e> data). Also I backtest contracts seprately ...in this way you are
e> sampling data and seeing if returns are consistent...another way
e> would be monthy testings.
e> BTW, I am still looking for a robust system with emas cross....How?
e> 1) filter noise - wavelets
e> 2) adaptive parameters (voli adjusted, pattern adjusted, etc)
e> 3) neural networks?
e> Any comments?
I have serious doubts that it can be done successfully over the long
term (MA crossover systems). It's generally accepted that markets
trend less often than they chop. With any kind of MA crossover,
you're going to suffer some amount of lag. When you do catch a
trending period, you may outperform for some period of time. But
eventually the chop will catch up to you I suspect. Moreover, your
trend needs to be so clean that you don't get taken out of it on what
is simply a correction. Set your MAs (or EMAs, or whatever) too
tightly, and welcome to 'Whipsaw World'. Set them too loosely
(filtering "wavelets, which in my mind can only be defined after the
fact), and you'll get taken out at the bottom of corrections and lots
of other cycles, and put back in just as the cycle is ready to roll
over on you again. I have never seen a MA crossover that works
consistently over the long run. In the short run, and granted the
short run can persist for some time, they can seem to be great. But
then comes payback time.
It all boils down to one question: Can you make enough during "clean"
trending periods to pay for the high cost of chop? Somebody may have
figured out a way to do that, and I can do it quite well over short
and selected periods of time. But I cannot do it over the long term
with MA crossovers, and my experience is that the chop will come, and
it will wipe out the gains from the trends.
The age-old dilemma: The longer the MAs, the less noise, but the
harder the lag is on your account. The shorter the MAs, lag isn't a
problem, but the noise is hard on your account.
Yuki
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