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[amibroker] Re: Will systems degrade? (was Optimization)



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"If one can always be sure what type of market one is in."

And therein lies the rub ... 


--- In amibroker@xxxxxxxxxxxxxxx, "wavemechanic" <wd78@xxxx> wrote:
> 
> ----- Original Message ----- 
> From: "jtelang" <jtelang@xxxx>
> To: <amibroker@xxxxxxxxxxxxxxx>
> Sent: Friday, October 17, 2003 4:53 PM
> Subject: [amibroker] Re: Will systems degrade? (was Optimization)
> 
> 
> snip
> 
> > I have a question for proponents of back and forward testing. 
Assume
> > that we're dealing with 3 years of data, where we use first two 
years
> > to optimize and the third year as forward testing period. Further
> > assume that you get following results -
> >
> > 1. When optimized over first two years, both of those years show
> > profit, but the third year shows loss.
> > 2. When optimized over all three years, all three years show 
profit,
> > although less than that showed by first test in first two years.
> >
> > Which set of parameters would you use going forward in the fourth
> > year? Or would you rather just dump the strategy? I personally 
think
> > that back and forward testing makes sense ONLY if you do the 
latter,
> > but I'm not sure that's what happens. But then... I could be 
wrong.
> 
> The first question is does the third year differ from the first 
two.  For
> example, do the first two years trend up and the third down.  If 
things are
> going to work OK, the two periods should be similar.  For this 
reason, some
> use bull markets to develop bull market systems, etc., and others 
use a
> sufficiently large data set that encompasses bull, bear, and 
trendless
> markets to develop systems.  The first approach would appear to be 
more
> aggressive, if one can always be sure what type of market one is 
in.  The
> other has a shot at producing a robust system that rides through 
all types
> of markets.  Choose your poison since there is no absolute answer.
> 
> >
> > Jitu
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx>
> > wrote:
> > > I'm willing to do the work I think, have been trying to 
already, to
> > the best
> > > of my limited understanding.
> > >
> > > but it's the concept of what to look for and how that puzzles 
me.
> > sometimes
> > > I do get nice backtest numbers, at least moderately nice. but 
if I
> > don't
> > > understand why that should be possible given what's been said 
about
> > the
> > > dynamics of market evolution, why should I believe them?
> > >
> > > I keep coming back to the same question that I'm sure you're all
> > sick to
> > > death of, I know I am: if auto-optimization isn't very 
successful,
> > doesn't
> > > that imply that past performance tells us very little about the
> > future, and
> > > if that's the case, how do we develop trading systems?
> > >
> > > dave
> > >
> > >   > ...frankly, it's hard to see how rational
> > >   > trading system design is possible in
> > >   > a world like this. or am I just depressed?
> > >
> > >   I like Edison's attitude when looking for the right material 
to
> > use
> > >   in the light bull. When yet another "bright" idea (sorry I 
could
> > not
> > >   resist) failed when tested, he is reported to have said, "We 
are
> > >   making progress. We now know of 999 things that will not 
work."
> > >   After trying everything from bamboo to who knows what, he
> > eventually
> > >   found the right material.
> > >
> > >   Genius is 5% inspiration and 95% perspiration.
> > >
> > >   b
> >
> >
> >
> > Send BUG REPORTS to bugs@xxxx
> > Send SUGGESTIONS to suggest@xxxx
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> >
> >


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