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One way to achieve stuff like this is by using parameters or concepts
that are self adjusting. An example would be a parameter value that
is related to an ATR.
--- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx>
wrote:
> Pal, couple questions/comments.
>
> - are you saying that 30 "occurrences" in any system produces 95%
accuracy?
> 30 trades? regardless of the market or trading system rules or time
frame?
> what's the basis for saying this?
>
> - could you explain "select stable parameters with an equity shift
less than
> the parameter shift after equity spikes have been eliminated"? I
don't
> understand what you mean.
>
> - just fyi, your last paragraph seems to be trying to convince me
that
> optimizing is good, probably in response to my asking "if you
prefer not to
> optimize parameters, how do you set them?". I asked that only
because you
> said, "I prefer a system to work without optimization", which I
thought was
> a nice goal, but one I don't understand how to achieve. seems that
you don't
> actually intend to avoid optimization either, since you then
discuss how you
> do it.
>
> dave
> There is a correct method to optimize any system that is
> statistically valid, 30 occurrences with 95% accuracy.
>
> The key to optimization is to select stable parameters with an
equity
> shift less than the parameter shift after equity spikes have been
> eliminated. This process creates stability for optimal parameters
> shifts within the four technical market phases. Parameter shift is
> always geometric, but equity shift decline relative to unstable
> parameter selection is usually exponential.
>
> All systems are optimized to some degree. As soon as a trader
chooses
> to enter a trade on the open as opposed to the high/low/close of
day,
> he has made a decision as to how a system should be traded. Does
he
> know the high/low/close of day entry is better than the next
opening
> for an entry? If not why not? A potential 28% difference in
> profitability exists for channel system entries between opens and
> closes.
>
> The purpose of trading is to consistently make money. This is
done by
> having the best information available. If a trader does not know
the
> best entry for his system, what is he trying to prove? That the
> system isn't optimized? To lose money because a trader is
ignorant of
> his systen's best parameters is foolish.
>
> Regards,
>
> Pal
> --- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx>
> wrote:
> > one question pal: if you prefer not to optimize parameters, how
do
> you set
> > them? or do you have some kind of trading rules that don't have
time
> > constants, trigger levels, etc, that need to be set?
> >
> > dave
> >
> > I thought I might throw in my 2 cents.
> >
> > Vendors love optimization, because it can generate eye popping
> > hypothetical profits which has no connection to real-time
trading.
> >
> > I prefer a system to work without optimization. But if I have
to
> do
> > it, I would make sure that the optimization is robust in the
> > following manner:
> >
> > 1. The sample size of data should be large enough to represent
> real-
> > time market conditions - bull, bear and sideways markets.
> >
> > 2. The look-back period should be as large as possible for the
> same
> > reasons.
> >
> > 3. The testing of optimizable parameters should be on out of
> sample
> > data using walk-forward analysis.
> >
> > 4. The Central Limit Theorem says that for a sample to assume
the
> > characteristics of the population, the size of sample should
be
> > large. The minimum sample size should be around 30. But since
an
> > uptrend or downtrend can last for say 50 periods, I would
have a
> > minimum sample size of 100 periods making sure that the full
> market
> > cycle is there (uptrend, downtrend and congestion).
> >
> > 5. The optimizable parameters should be as few as possible and
> tested
> > in a wide variety of markets.
> >
> > Curve-fitting is like rolling a fair dice with 1/6
probability of
> > getting any number from 1 to 6, rolling it 5 times, getting
#6, 4
> out
> > of 5 times (80%) of time.
> >
> > A lot of traders fall in the trap of curve-fitting without
being
> > aware of it. So when designing a system, it is important to
keep
> your
> > guard up as far as curve-fitting is concerned.
> >
> > Regards,
> >
> > Pal
> > --- In amibroker@xxxxxxxxxxxxxxx, "Gary A. Serkhoshian"
> > <serkhoshian777@xxxx> wrote:
> > > Fred,
> > >
> > > Could you narrow-down your idea of a reasonable sample size
for
> > backtests. You've been hinting at rather sizeable backtesting
> > periods, but would like to put some numbers to it. Also
wonder if
> > you use # of trades as a guide versus period of time for
> backtesting
> > period.
> > >
> > > Thanks,
> > > Gary
> > >
> > > Fred <fctonetti@xxxx> wrote:
> > > 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@x...]
> > > >
> > > > 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.
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