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Pal,
I have a lot of reading to catch up so I don't know if anybody
responded to your equity line question.
It sounds to me that you are compounding your results, correct? If so
a few big wins at the start of your equity line vs several losses at
the start will greatly affect your equity line. Check the first
several trades. Here is where it has the greatest effect. A way
around this is to test on a single issue or set amount.
Regards,
John
--- In amibroker@xxxxxxxxxxxxxxx, "palsanand" <palsanand@xxxx> wrote:
> Hi,
>
> Here is an interesting observation on system testing:
>
> Say you run a system test over 10,000 bars of data, then print out
a
> chart of the system's equity line. Then repeat the test, but start
> 100 bars later. Let's say two trades were included in those 100
bars,
> so they've been dropped. Now print the second equity line and
compare
> it to the first. You'd get exactly the same equity line, but 100
bars
> shorter. Right? Wrong!
>
> When I do this I get a radically different equity line on the
second
> test, i.e., they are not near-mirror images of each other. My hunch
> is that a form of the chaotician's "butterfly-effect" has arisen:
> changing any given trade's market position (long, short, flat) will
> effect in a chain reaction all the subsequent trades in complex and
> unexpected ways. Here dropping the first two trades could very well
> change the system's market position when the third trade is
> calculated, and so on.
>
> I believe this observation has profound and unfortunate
implications
> for the robustness of system testing. It's a second and more subtle
> problem that lies behind the mere curve-fitting/optimization
problem.
>
> If dropping a couple of early trades will always effect later
trades,
> then there's no truly "neutral" starting point with any test data.
> Where your test data starts determines the final test results just
as
> much as your system does.
>
> The success or failure of many different mechanical systems is
> predicated to a surprising and varying degree on the sequence of
> events just prior to the first actual trade generated by the
system.
>
> The trade setup and timing of the first trade can have a profound
> effect on the subsequent trading results. The circumstances and
> timing of entry into the first trade can sometimes make a huge
> difference in the overall trading performance.
>
> Regards,
>
> Pal
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