|
PureBytes Links
Trading Reference Links
|
<SPAN
class=725272411-22102003>I understand what you're saying, but doesn't it seem
like there might well be some useful numerical measure of the flatness of
the 3D graph, for example?
<SPAN
class=725272411-22102003>
<SPAN
class=725272411-22102003>dave
<BLOCKQUOTE
>
I think there is a human component that has to be included in system
development. I am a believer in mechanical systems from the standpoint of
trade execution. However, when you are trying to develop your mechanical
system and to decide how best to implement it, you have to make some judgments
that I don't think can easily be automated into a single, multidimensional
matrix out of which comes a simple, black and white answer. There will always
be shades of gray that require human judgment. That's why I sent along that
figure (just an example). You have to develop your own decision rules that are
right for your personality, and those require you to examine a multitude of
objective functions to aid in your decision. There is a software package
called Powerkit, wherein the developer has included 3 canned systems that the
user can tweak with any combination of parameter values he wants to optimize.
When the optimization is done, a 3-dimensional graph automatically appears
showing how the parameters affect profits in 3-dimensional space. You pick
your parameter values based on the flatness of the 3-D graph, which is a
measure of robustness. TJ once told me that he plans to develop a
similar 3-D graphical capability that will blow Powerkit out of the
water. That is probably on the lower part of his priority list right now, but
it will come eventually.
Is that a sufficiently vague answer to your question? :-))
Al Venosa
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
Dave Merrill
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Tuesday, October 21, 2003 8:23
PM
Subject: RE: [amibroker] Invitation --
suggest your favorite objective function
<SPAN
class=266261800-22102003>that's how I've approached it in general
too, eyeballing the various result outputs manually. but if possible,
I'd like to systematize it, partly so it can be an object comparison
measure, and partly so it can become a part of the trading system
itself.
<SPAN
class=266261800-22102003>
<SPAN
class=266261800-22102003>do you have any sense of how that might be done? it
doesn't seem that the example you gave boils down to simply weighting and
summing the various individual metrics.
<SPAN
class=266261800-22102003>
<SPAN
class=266261800-22102003>any other ideas, anyone, on systematically
combining them some other way that captures more of what we do when we
eyeball?
<SPAN
class=266261800-22102003>
<SPAN
class=266261800-22102003>dave
<BLOCKQUOTE
>
I think there are numerous ways to evaluate your system rather than
relying on one objective function. For example, the other day, I was doing
a portfolio optimization to find out the optimum no. of positions I should
have open, given a certain amount of starting equity. I then plotted the
results of a few of the output parameters TJ now gives us in an
optimization output. See attached png file. If you were simply using one
objective function (CAR) without considering anything else, you would
choose 5 open positions because that's where CAR max'd out. However, MAR
(=CAR/MDD) was still rising as was UPI (you want that to be high), while
UI (you want that to be low) was still falling and RAR/MDD was still not
max'd out yet. So, when you look at 7 open positions, you see that UI had
pretty much bottomed, UPI, RAR/MDD, and MAR had finally topped. So, in
this particular case, the optimum no. of open positions would be selected
to be 7, in my opinion, rather than 5. So, using this tiny little example,
I think you need to look at several different objective functions and
decide on the best strategy based on the total story they all tell. I also
like to use expectancy, which I think is an extremely important and useful
objective function. Sorry for the multiple answer, but I don't think there
is only one criterion upon which to judge a trading system.
Al
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.
|