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Howard,
To me this is a good example of a poor system. It was simply
looking at the stocks which had done best over the past few (say 3) years -
nothing else. I was trying to point out that, for me, my 'systems' have become
more robust by considering more varied market conditions. Testing over three
years of raging bull market can give you a superb system over the following 2
years of bull market, but hold onto your hat come March 2000!
Steve
<BLOCKQUOTE
>
<SPAN
>Hi Steve
–
<SPAN
>
<SPAN
>I think you just gave
a good example of a profitable system that did fail. In my opinion, our
models are static representations of dynamic markets. Whenever the
market characteristics change in a way that our model does not recognize, for
whatever reason, then that model has failed.
<SPAN
>
<SPAN
>But, if you are
talking about investing in MSFT, CSCO, etc because of fundamental data (great
earnings, super analyst recommendation, etc) rather than technical data, I
have very strong feelings that that will never work. I’ve posted on the
HolyGrailSM forum about that.
<SPAN
>
<SPAN
>I wish I could trade
yesterday’s charts – I’ve got some great systems for them.
<SPAN
>
<SPAN
>Big
grin.
<SPAN
>
<SPAN
>Howard
<SPAN
>
<DIV
>
<SPAN
>-----Original
Message-----From: Steve
Almond [mailto:steve2@xxxxxxxxxxxxxxxxxxxx] <SPAN
>Sent: Friday, October 17, 2003 12:41
PMTo:
amibroker@xxxxxxxxxxxxxxx<SPAN
>Subject: Re: [investment] RE: [amibroker]
Will systems degrade? (was Optimization)
<SPAN
>
<SPAN
>I'm not sure this idea of profitable systems 'failing'
is actually true. I (along with millions of others) hit on a superb system in
1998. It was called invest in MSFT, CSCO, DELL and AOL. (let's call it a
momentum system). It worked superbly until about March 2000. It didn't work
after that, but I don't believe it was due to inefficiencies of the market
disappearing. It no longer worked because the market changed (and the
system didn't have the ability to change with that market).
<SPAN
>NOW I can develop systems that work (with
hindsight/data mining/curve fitting) all the way from 1998 to today. Will they
continue to work into the future? Maybe (although judging just by today, the
answer is no....), but I'm fairly sure they have a much better chance that the
MSFT etc. system.
<SPAN
>
<SPAN
>Steve
<BLOCKQUOTE
>
<SPAN
>
<SPAN
>seems like
one corollary of this is that as soon as we figure out something that
appears profitable, we should move quickly, before its advantage disappears.
<SPAN
>
<SPAN
>it also
seems like the notions of backtesting and optimization are unlikely to
succeed, even more so the further back you go, since whatever advantages
they indicate have probably already evaporated. unless they just happen to
be recurring again now...
<SPAN
>
<SPAN
>frankly,
it's hard to see how rational trading system design is possible in a world
like this. or am I just depressed?
<SPAN
>
<SPAN
>dave
<SPAN
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