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Dave: you said-----
<span
>
<span
>outside of when
you choose to optimize, it fundamentally comes down to whether past
performance predicts future performance or not. if auto-optimization fails as a
concept, doesn't that say that there's a basic disconnect between how a system
and settings performed in the past and how it does in the future? if
that's true, why do we believe that any backtest results tell us anything
useful at all?
<span
>
<span
>one possible
answer is that raw profitability may not be the best predictor of future
performance, so we need better metrics to judge past performance than
simple equity growth. the framework comes with two rules for scoring
performance during optimization, and you're heartily encouraged to edit those
or add your own.
<span
>
if I really believed that observing past performance
told us nothing about the future, I'd have to abandon TA completely and look to
fundamentals, industry news and knowledge, etc for trading strategy.
Isn’t there some aspect of past
performance (results) that can “persist” for some time. That
is to say, that a stock or mutual fund that is profitable for awhile (esp from
a backtest or ranking perspective) does not and probably will not remain profitable
“forever”. However, it can and does remain a good performer
for some period.
What parameter(s) measure this? It
probably changes over time but it seems a combination of return along with
absence of large volatility is a key measure. The UPI or UI or even CAR/Mdd
seems like it captures more than just raw return. While this seems more
true for mutual funds (actively managed ones at that), it can also be true for
certain stocks in certain industries.
Just rambling out loud….I have not
had time to try your system----can it optimize against CAR/Mdd? for example?
Ken
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