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Chuck,
Agreed ... Ergo my statement ... It depends on the system.
--- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
<chuck_rademacher@x> wrote:
> 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.
>
> 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.
>
> 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.
>
> 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.
> -----Original Message-----
> From: John [mailto:jea55129@x...]
> Sent: Monday, October 20, 2003 8:35 AM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: 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 1000
> 2000 1900
> 3800 3420
> 6840 5814
> 11628 9302
> 18605 13954
> 27907 19535
> 39070 25396
> 50791 30475
> 60949 33522
> 67044
>
> 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
> >
> >
> >
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