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Is this the proper forum for this discussion?
Can any of this discussion be translated into Amibroker insights, code
examples or solutions?
Heck... I get off topic every now and then, but I would not take
offense to having my reins jerked when needed.
Phsst
--- In amibroker@xxxxxxxxxxxxxxx, "palsanand" <palsanand@xxxx> wrote:
> Hi,
>
> Quite a few articles and books have been written on the topic of
> system optimization. Most of the work done in this area concludes
> that optimizing individual systems does not provide a superior
> result. If you take, for example, a MACD oscillator and optimize it
> over a year of data, and then trade that system in the future, it's
> odds of success are meager....
>
> You have to optimize many individual systems and arrive at a
> collection. You can then use Back Test scores from the systems to
> form a consensus to create Entry/Exit signals. This is very
> different and much more advanced, than just optimizing an MACD. You
> can try "fixing" the systems, but in all cases the accuracy of the
> signals will be less than that achieved by optimizing....
>
> No matter which systems you use, they will fail at some time or
> another. However, you will find that Forward Test results of a
> fixed, non-optimized system are dramatically less than an optimized
> system if you use a collection of optimized systems and form a
> consensus....
>
> Prediction is difficult, especially of the future...
>
> Niels Bohr
>
> Regards,
>
> Pal
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx>
> wrote:
> > let me throw the discussion of optimization in another direction
> for a sec,
> > into equity feedback, something I've been looking at a lot lately.
> >
> > just to be clear what I mean, the idea is to pick your trades from
> among the
> > stocks (or whatever) that have historically done the best at that
> same
> > method, or something as similar to it as possible. for example
> (don't put
> > money on this!), say you went long or short when MACD(13, 21)
> crossed zero,
> > but picked stocks with the most strongly positive returns to date
> by that
> > method.
> >
> > in a sense, this amounts to automatic optimization, by the most
> seemingly
> > relevant means possible: grading performance under the same system.
> another
> > way to look at it is that it automatically selects a universe of
> stocks to
> > run on, including only the ones that perform best with the strategy
> used.
> >
> > given those general mechanics, you'd think this would produce good
> results
> > frequently, with a variety of common indicators, over many time
> frames and
> > universes of equities. my experience is that this isn't the case.
> on the
> > contrary, for example, it's hard to find system that are juicily
> profitable
> > from '92 to present on the NASDAQ 100. works better on the whole
> NASDAQ, I
> > think because a larger total universe has a better chance of
> containing some
> > stellar choices, but it's still hard to do outstandingly well.
> >
> > what does it mean if a strategy doesn't perform well when managed
> like this?
> > seems like one of two things: either not very many tradable stocks
> > (sufficient liquidity and price etc) perform well with the
> strategy, or,
> > past performance with the strategy doesn't correlate well with
> future
> > performance.
> >
> > if not many stocks do well with the strategy, it's just not that
> generally
> > applicable. perhaps it has parameters that need to be tailored more
> to each
> > individual stock or time frame, more than the algorithm itself
> does. if so,
> > the next direction to pursue might be more auto-compensating
> metrics within
> > the strategy. OTOH, the more complex and rube goldberg things get,
> the more
> > they seem like fragilely over-optimized special cases, unlikely on
> principle
> > to be robust beyond the specific conditions under which they were
> tested.
> >
> > on the other hand, what if past performance doesn't predict future
> > performance? maybe some other metrics would, but how would you
> know? any
> > backtests you did to find that out couldn't be relied on to predict
> the
> > future themselves.
> >
> > is there a third hand? or have I screwed up my equity feedback
> code, and
> > everyone else here has tons of highly profitable systems like this
> that
> > they're not talking about?
> >
> > thoughts?
> >
> > dave
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