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Fred,
Related to your points below, I have a few questions.
1. Understanding your point about equity feedback. Which selection criteria have you found to be most robust? With any selection measure it seems we have to make a leap of faith that good performance in the past will continue in the future. I'm finding Alpha to be useful.
2. Your second comment related to making system auto adjustments on the fly. Isn't that essentially auto-optimizing or is it more in line with the IP method that DT has been sharing?
Thanks for sharing,
Gary
Fred <fctonetti@xxxxxxxxx> wrote:
Howard,With regards to equity feedback what I think I was trying to say was that I have not found equity feedback to be a particularly good methodology of deciding what to trade as opposed to evaluating a particular trading system where I would certainly agree that the curve itself and the statistics that rleate to it are very important. For example I've never found attempting to measure and then utilize how well some particular security moved during the last up move of what ever magnitude you want to describe the up move as being as indicative of what's likely to happen during the next up move.As far as markets changing characteristcs over time and the inability of at least SOME systems to adjust to those, I would certainly agree that this is true in a lot of cases. My particular preference in this regard
is to write systems that make their own adjustments on the fly for changing conditions as opposed to testing short samples of data on a walk forward basis.Fred--- In amibroker@xxxxxxxxxxxxxxx, "Howard Bandy" <howardbandy@xxxx> wrote:> Hi Fred -> > > > If I look at the equity curves of two trading systems, one that has been> upward sloping and smooth, and the other irregular, that tells me that one> trading system has been better than the other. If I project into the> future, I only have past behavior to use as a guide. So my preference is> the trading system associated with the better equity curve. Am I missing> something?> > > > Howard> > > > -----Original Message-----> From: Fred [mailto:fctonetti@xxxx] > Sent: Sunday, October 19, 2003 10:24 AM>
To: amibroker@xxxxxxxxxxxxxxx> Subject: Objective functions (was RE: [amibroker] Re: Optimization -- again)> > > > 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. > > --- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx> > wrote:> > don't think I get what you mean here fred.> > > > you can't be saying that metrics on the equity curve of a trading > strategy> > or its parameters aren't useful, right? that's the only thing we > have to> > judge the effectiveness of our methods and settings.> > > > so you must be saying that equity feedback isn't a useful concept,> > regardless of how
you measure "good" equity. do I have that right?> > > > if so, as I've said, my experience agrees -- none of the indicators > I've> > tried are wonderfully profitable when auto-optimized this way. I > just cannot> > for the life of me understand why that's the case, if backtests > tell us> > anything useful about future performance.> > > > if I've misunderstood completely, my apoligies (:-)> > > > dave> > Like a lot of other things that sound like they SHOULD work, I > have> > never found metrics related to equity curve feedback to be of much> > value in the determination of system parameter values.> > > > --- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx>> > wrote:> > > interesting as usual
howard (:-). one piece I wanted to drill > into> > a bit.> > >> > > I wonder what the effect of using performance measures that> > concentrate on> > > certain things at the expense of others actually is.> > >> > > for example, my auto-optimization stuff currently uses simple> > profit per bar> > > to choose parameter values. my gut-level assumption was that > since> > it was> > > ignoring drawdown (among other things), the resulting systems > might> > have> > > higher drawdown than I was comfortable with, but that profit per> > bar should> > > be as good as the trading method could produce.>
> >> > > maybe that's not the case. maybe by choosing a more balanced> > success metric,> > > not only would the other factors not considered by my simplistic> > first pass> > > metric be improved, but profitability might be improved as well.> > >> > > is this something you've investigated or thought about? anyone > else?> > >> > > dave> > > Note ? it is perfectly valid to have different objective> > functions for> > > different purposes. For example, I might be modeling the > behavior> > of a> > > sector, say oil services, with the intent of trading individual> >
stocks based> > > on what I learn. In this case, I want to identify periods of> > rising prices> > > with careful attention to turning points, but without much > interest> > in> > > overall profit. On the other hand, I might be modeling > individual> > high beta> > > tech stocks, in which case my model includes several stop loss> > techniques> > > and I care most about avoiding drawdowns.> > >> > >> > >> > > Thanks,> > >> > > Howard> > > > > > Yahoo! Groups Sponsor> > > > >
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