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<FONT face=Arial color=#0000ff
size=2>Fred,
I
think market behavior does change because the market itself has changed. 10
years ago your broker told you "Buy GE, put it under the mattress, you will make
money". If you took his advice and bought it on Monday only to watch it fall all
week then called him up he would tell you "We are in this for the long haul,
relax" ...... and you probably did, especially since your trade probably
cost you over $100 round trip. 10 years ago a one year or 6 month hold
was considered "Short Term" today that is no longer the case. With online
brokerage accounts you can now buy and sell that same chunk of stock for $10 per
side. Your broker isn't selling the stock de jour, instead you are picking it
your self. You have access to hundreds of websites, dozens of data providers and
have computer power on your desk that could have launched a rocket a half a
generation ago. And more importantly so do millions of other "Small investors".
Day traders didn't even exist. This isn't your fathers market, IMO to back
test data from 10 or 20 years ago and think that optimizing on that data to
trade today holds little value. The markets turn on a dime and there is a whole
new breed of more nimble traders taking part in the action. The dynamics and
psychology of the market is completely different. It is no longer ruled by the
few. Watch the buy/sells go through and you see trade after trade of 100-200 or
500 shares. This is not Dean Whiter placing trades but Joe and Jill six pack. 5
years ago I used to always wait until the first have hour of trading had passed
before placing a trade to avoid the built up demand already in the pipe. Now if
I wait more than 10 minutes the train is out of the station. Perhaps it is just
a forest/trees scenario but I think there are fundamental differences in the way
the markets react today versus the recent past......
<FONT face=Arial color=#0000ff
size=2>
<SPAN
class=943274522-19102003><FONT
face=Arial color=#0000ff size=2>
Regards,
Jayson
<FONT face=Tahoma
size=2>-----Original Message-----From: Fred
[mailto:fctonetti@xxxxxxxxx]Sent: Sunday, October 19, 2003 5:38
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: Objective
functions (was RE: [amibroker] Re: Optimization --
again)There are a lot of questions and provacative
statements in your post, only one of which from my perspective needs an
answer/response.Market behavior will continually change after that
... Change ? from what ? into what ? I guess this is the part I
don't follow. To me there is nothing new in market behavior now that
didn't exist last month, last year, last decade, last century, but
clearly those that take a short sighted view of history and the market
action that made up that history will clearly never see it. It's a
forest and trees thing ... --- In amibroker@xxxxxxxxxxxxxxx, "Dave
Merrill" <dmerrill@xxxx> wrote:> I'm not trying to be
argumentative, honest (:-)... I'm more than a little> sick of saying
the same thing over and over, but I j u s t d o n '
t g> e t i t .> >
------------------------------> > I fail to see the huge
difference in principle between equity feedback and>
backtesting.> > let's start by assuming that backtesting
performance of a system and its> parameters over some period of past
data tells you something about its> future performance. it's not a
perfect predictor, but it's the best evidence> we have. does this
seem like a reasonable starting point? what alternative> is
there?> > if that's true, why is it better to do it only once?
what justification is> there for picking one examination period over
another? clearly market> behavior will change continually after that.
don't we need a way of working> that looks at what's been happening
and evolves our response?> > sounds like we examine performance up
to some point and adjust, trade with> the best-choice system and
parameters for a while, then examine and adjust> again later. make
sense? what alternative is there?> > so then, how often do we
re-examine performance history? to put it> differently, how long do we
ignore any changes in market dynamics that may> or may not have
occurred? why would intermittently refusing to look and> respond
improve system performance or reliability?> > if that needs to be
done, why not have the system itself do it, as part of> its inherent
operation? why is it better for us as an outside agent to>
periodically run some separate tests, reach into the internals of
the> system, and change stuff?> > or should we just
continue with the system and parameters we choose at the> beginning?
are they somehow more valid than what we'd choose later, using> the
same backtesting methods, but on a different date range of data?>
> ------------------------------> > I realize that even if
it seems to make sense logically, this all a complete> crock if no
systems put together like this even backtest well, never mind>
forward testing.> > but every time I think about abandoning this
line of research, it seems like> the first thing I'd want to do with
a new system would be (let me guess),> test and possibly adjust it
using data up to some date, then run with it for> a while after that
and see if equity growth is good. if it is, I'd want to> lather,
rinse and repeat with other in and out of sample data, to make sure>
that wasn't coincidence.> > sounds way too familiar to be a
completely different animal.> > dave> From:
Fred [mailto:fctonetti@xxxx]> > That IS what I was
trying to say. I suspect because equity feed back>
is like looking in a rear view mirror, great for letting us
know> where we were and how we could have adjusted the past
to make it> better, but that's about it.Send
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