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<FONT face="Courier New" color=#0000ff
size=2>thanks, I'll check it out if I can find it.
<FONT face="Courier New" color=#0000ff
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<FONT face="Courier New" color=#0000ff
size=2>I'm sure I'm ignorant, but how logic or sound trading principles can be
used to set an MA period (for instance) without examination of past history
escapes me. as does the distinction between using past history or 'experience'
to do that and optimization. as does the justification for seeing
optimizations from one point in time as somehow blessed above all
others.
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<FONT face="Courier New" color=#0000ff
size=2>dave
<BLOCKQUOTE
>I
would have to refer you to an article published by Futures Magazine
concerning optimization and its research value in November 20?? by
Kent Calhoun.Possibly the only way to do it correctly, is to first
arrive at a setof parameters and algorithm based on logic, experience, or
soundtrading principals that won't be subject to change. Then do a
walkforward with no attempt to improve results via
optimization.Regards,Pal --- 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@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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