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Al,
The term is used in some innovative directions in music.
As for the origin, it is an old story, from 49 B. C. when Julius
Caesar ...
http://www.digonsite.com/drdig/greece/65.html
Although it is not used in T/A, at least AFAIK, it is of the most
expressive and close to trading reality.
My IPs also introduce the aleatoric procedure, you do not know, in
advance, the stock or the parameters you will trade, you only suppose
they will be the best up to the next IP.
It is the other side of all these deterministic T/A fashions, "trade
this set of parameters because of the robustness".
I do not know any robust system, aleatory is closer to what I see in
the markets the last years.
As for the linguistic part, since the word is borrowed from the vast
Latin domain,
http://education.yahoo.com/reference/dictionary/entries/79/a0187900.ht
ml
ADJECTIVE: 1. Dependent on chance, luck, or an uncertain outcome: an
aleatory contract
between an oil prospector and a landowner.
2. Of or characterized by gambling: aleatory contests.
3. also a·le·a·to·ric Music Using or consisting of sounds to be
chosen by the performer or left to chance; indeterminate:
Dimitris Tsokakis
--- In amibroker@xxxxxxxxxxxxxxx, "advenosa@xxxx" <advenosa@xxxx>
wrote:
> Sorry, Steve, can't help myself. DT taught me a new word this
morning
> (aleatoric, although more properly it is aleatory), but robustivity
just
> doesn't exist. It's robustness. :-))))
>
> AV
>
> Original Message:
> -----------------
> From: CedarCreekTrading kernish@xxxx
> Date: Fri, 31 Oct 2003 10:09:37 -0700
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: Re: [amibroker] Robustivity
>
>
> am I missing something?
>
> Dave,
>
> Sometimes it's tough to address issues and provide the specifics
that folks
> are seeking. So, I will try to "splain" it better.
>
> If I am using the CMO5 with triggers of 34/-34, I would go back and
start a
> test to evaluate this system and triggers. The starting period
would be
> whatever date you pick (1990, '97, 2000, etc.).
>
> Next, I run the test over 315 trading days (this period gives me
results
> for approximately one year..it takes "x" amount of periods to load
the
> TRIX(21), which I use as a trend identifier. My approach produces
about 10
> to 15 round turn trades a year... in each stock.
>
> I then rank all issues by one criteria: percent return per day
(while the
> money is in the market). If you only consider the percent per day
> contributions, I think you will find that all other "book learned"
ratios
> come out just fine. Numbers lie. Would you rather trade a $100
stock that
> returns $20 or a $20 stock that returns $10? Percent per goes a
long way
> to normalizing the comparisons.
>
> I pick the 20 best percent per day stocks and trade them for the
next
> quarter. At the end of the quarter, I reevaluate the percentage
per day
> contributions and reshuffle the issues in play, if necessary.
>
> Symtems don't go bad, stocks and commodities go bad. Going bad is
best
> defined by a change in the pattern of supply and demand. The cream
rises
> to the top of the list.
>
> Is this optimizing? Could be, by some definitions. If all the
odds are
> even money, who would you prefer to bet on: Chicago or Kansas
City? KC is
> undefeated and Chicago couldn't beat the local high school. My
money is on
> KC.
>
> The stock betting setup is not handicapped (like almost all
games). This
> is basically a even money play (with subtractions for commission and
> slippage...juice/vigorish). If you have 9,000 issues to play, why
won't
> someone want to bet on the strongest performance?
>
> I know that the explanation might be over simplified...but, the
people who
> know me, in and out of this forum, know that this is the way I do
it. I'm
> not crusading for anything. This works. I've presented this
simplistic
> approach publicly to large groups and in a number of internet
seminars. It
> continues to crank out extraordinary profits.
>
> Please let me know if the paragraphs help to explain the ranking.
>
> Take care,
>
> Steve
>
>
> ----- Original Message -----
> From: Dave Merrill
> To: amibroker@xxxxxxxxxxxxxxx
> Sent: Friday, October 31, 2003 9:29 AM
> Subject: RE: [amibroker] Robustivity
>
>
> steve, thanks for your response.
>
> from your msg subject and the way you presented this system, I
thought
> you were offering it as an example of one you had objectively
evaluated and
> determined to be robust. I was interested in how you
thought "robustivity"
> should be evaluated, since you seemed to be contrasting your
approach to
> walkforward optimization and the various other system measures
people were
> talking about.
>
> what I'm hearing in your response below isn't what I would
describe as a
> specific method for distinguishing accidentally gorgeous backtest
results
> from robustness. you do mention testing also at faster time frames,
which
> isn't a technique that's been mentioned recently. but mostly, the
> robustness label here seems to come from your integration of various
> aspects of your long experience with it, like your visual sense of
how it
> behaves. am I missing something?
>
> another question: you mention issue selection, the idea of
looking for
> stocks you think will trade well with a particular indicator,
rather than
> the other way around. how do you do that? by measuring raw past
growth
> trading that indicator? other measures?
>
> thanks again,
>
> dave
> just for my understanding, in what sense is this
system "robust"?
>
> Well, first, this was presented to the public in the late 90's,
at a
> series of seminars that I conducted for Equis. Same indicator, same
> triggers, same everything. This robust "thing" is a tough one to
define.
> I'll try to explain what's important to me, but, it's very
subjective and
> just one person's opinion.
>
> is it because results are similar with different similar
periods and
> thresholds?
>
> If you take this CMO5 indicator and step down in time (5, 10, 60
> minutes), you need to widen the triggers to obtain decent results.
Other
> than that, it trades through time-zones with very good results.
>
> that seems unlikely, since there isn't very far to go from 5 to
hit 1
> and 0, which I'd guess are significantly different. what sort of
testing
> led you to decide on this period and threshold, and this system for
that
> matter?
>
> If you're referring to the CMO5...I first started testing it
six years
> ago. I've tested and eyeballed every version of CMO(x). I've
created a
> few indicators that combines different periods of the CMO. For my
money,
> for my style, this judge of momentum trades more things, more
accurately
> than any other indicator I am aware of. As I have begged many
times: give
> me something better...I'll use it instead of this.
>
> is it robust because it works well on many stocks, indexes and
funds
> over a long period of time?
>
> Yes, it works well on many stocks and indexes. I don't trade
funds,
> but, some fund managers, DTG members, use versions of the CMO to
aid their
> timing.
>
> because of the concepts behind the indicator itself?
>
> I process visually. The math is beyond me. My bottom line has
always
> been the same: give me an indicator that is smooth, yet sensitive
to
> intermediate and major market turns. After gawking hundreds of
charts,
> everyday, for the last six years, I'm amazed at how this indicator
> quantifies momentum. I like versions of the Stochastic RSI and the
> Standard Error Oscillator, but dollar for dollar, the CMO does it
for me.
>
> something else?
>
> I think there's a few other things to mention. First of all,
the ETF's
> that I showed were chosen because they represent a broad range of
stocks
> and are popular trading instruments. Do I suggest trading these
issues
> with this system? No way. The CMO5 trades a lot of other issues
with
> better results than the ETF's. I always allow the issues "to pick
> themselves". Trade the issues that return the greatest percentages
in a
> stable system.
>
> In it's stripped down version, as presented, the CMO5 is an
indicator
> that can return steady profits (see equity lines) in it's rawest
> unoptimized form. Is that robust?
>
> Robustness and optimizing/over-optimizing are fascinating and
> misunderstood subjects. Over the years, I've constantly simplified
my
> approaches. I can improve on the results of the three ETF's by
simply
> "tweaking" the trigger levels. But, will it walk forward better
than the
> default triggers of 34/-34? At least what I presented was out of
sample.
>
> If an approach does a good job of identifying movement of
supply and
> demand, the approach should not be expected to work on all issues.
To say
> a system needs to work on all issues is total crap. To say that
a system
> sucks because it doesn't work on XYZ is another large pile. Build
simple
> things and concentrate on issue selection.
>
> Optimization leads to dark and spooky places. Ranking leads
you down
> the yellow brick road.
>
> Take care,
>
> Steve
>
> steve, thanks for sharing this (again).
>
>
> just for my understanding, in what sense is this
system "robust"?
>
> is it because results are similar with different similar
periods and
> thresholds? that seems unlikely, since there isn't very far to go
from 5 to
> hit 1 and 0, which I'd guess are significantly different. what sort
of
> testing led you to decide on this period and threshold, and this
system for
> that matter?
>
> is it robust because it works well on many stocks, indexes
and funds
> over a long period of time?
>
> because of the concepts behind the indicator itself?
>
> something else?
>
>
> I'm not disputing the system's value, which I haven't tested
yet. I'm
> trying to understand what kind of process you go through to settle
on a
> system and settings.
>
> thanks,
>
> dave
>
> 1. This exact system was presented over a year ago at this
forum
> 2. The charts are OOS (since, it's been posted publicly
forever)
> 3. Rules are simple: Buy the opening of the next day when
the
> CMO5 closes below -34 and sell when it triggers above 34.
>
> Works on most issues (raw). Works better if:
>
> a. You take trades only with the trend
> b. You protect yourself from large drawdowns (stop)
> c. You conjure a profit target (limit)
> d. You put in a time stop
>
> This is the guts of an indicator and a logical systematic
approach.
> Whistles and bells are optional (but, in my opinion necessary).
Again, if
> you start with a pig, the prom dress doesn't make it look any
better.
> Don't hang ornaments on a twisted Christmas tree.
>
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