|
PureBytes Links
Trading Reference Links
|
What
is being (mostly) ignored in this discussion is that is entirely possible to end
up with ALL subsequent trades being different. Let's say we are
talking about whether or not the first five trades were taken as a result of
starting the backtest earlier vs. later. So the first trade in the
run that starts later MAY have been the sixth trade in the run that starts
earlier.
<FONT face=Arial color=#0000ff
size=2>
The
only problem is that the system may not have any cash available to make the
sixth trade. So it, and maybe the next couple of trades are
skipped due to no availability of funds. I hope that you can see
that the two backtests may NEVER be in sync from that point
on.
<FONT face=Arial color=#0000ff
size=2>
Of
course, if the system is such that all positions are dumped every time there is
a change in market trend (therefore a stock system), then the two backtests
should get back in sync at the next trend change. In these scenario,
however, the number of shares will (probably) be different.
<FONT face=Arial color=#0000ff
size=2>
This
thread all started by someone asking if it was a bug that two equity curves did
not look alike (other than the beginning) when the backtest continued on for
several years. I think we have come up with dozens of instances why
they may be different. I tried two systems (after thinking about
what type of systems to try). One produced perfectly matching
equity curves (after the start) and the other produced completely different
trades and, therefore, equity curve.
<BLOCKQUOTE
>
<FONT face="Times New Roman"
size=2>-----Original Message-----From: John
[mailto:jea55129@xxxxxxxxx]Sent: Monday, October 20, 2003 8:35
AMTo: amibroker@xxxxxxxxxxxxxxxSubject: Objective
functions (was RE: [amibroker] Re: Optimization --
again)Dave,Your missing something :) Pal
wrote that he was missing the first two trades. Here is a small example I
just did in excel. Two accounts both starting out with 1000. On the column
on the left, I made 100% profit on the first trade, 90% on the second,
etc...The last trade I made 10%, compounded. I only took out the 100%
profitable trade on the other column. Everything else the same. Quite a
difference in equity, corrrect?1000
10002000
19003800
34206840
581411628
930218605
1395427907
1953539070
2539650791
3047560949
3352267044 John--- In
amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx>
wrote:> it's counterintuitive to some degree, but whether your
gains or losses come> first doesn't effect the final outcome (with
the possible minor exception of> interest effects). multiplication
is commutative, so the order in which> several multiplications are
done doesn't matter.> > $10k x 150% x 50% is the same as $10k x
50% x 150%> > because> >
$10k x 150% = $15k and $15k * 50% = $7.5k>
and> $10k x 50% = $5k and $5k * 150% = $7.5k> > >
or am I missing something?> > dave> 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>
> > >
Yahoo! Groups
Sponsor>
ADVERTISEMENT> > > > > Send BUG
REPORTS to bugs@xxxx> Send SUGGESTIONS to
suggest@xxxx>
-----------------------------------------> Post
AmiQuote-related messages ONLY to:
amiquote@xxxxxxxxxxxxxxx> (Web page: <A
href="">http://groups.yahoo.com/group/amiquote/messages/)>
--------------------------------------------> Check group
FAQ at:> <A
href="">http://groups.yahoo.com/group/amibroker/files/groupfaq.html>
> Your use of Yahoo! Groups is subject to the Yahoo! Terms
of Service.Send
BUG REPORTS to bugs@xxxxxxxxxxxxxSend SUGGESTIONS to
suggest@xxxxxxxxxxxxx-----------------------------------------Post
AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx (Web page: <A
href="">http://groups.yahoo.com/group/amiquote/messages/)--------------------------------------------Check
group FAQ at: <A
href="">http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of Yahoo! Groups is subject to the <A
href="">Yahoo! Terms of Service.
Yahoo! Groups Sponsor
ADVERTISEMENT
Send BUG REPORTS to bugs@xxxxxxxxxxxxx
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx
(Web page: http://groups.yahoo.com/group/amiquote/messages/)
--------------------------------------------
Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
|