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Fred,
I was making a joke at the end of a long
week. I'm sure you got it.
Take care,
Steve
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
Fred
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Friday, October 31, 2003 3:24
PM
Subject: [amibroker] Re:
Robustivity
Over-optimize robustness ?!That's an interesting
concept, but I think not possible due to mutual exclusivity but I suspect
at least someone out there won't agree.--- In <A
href="">amibroker@xxxxxxxxxxxxxxx,
"CedarCreekTrading" <kernish@x...>
wrote:> Dave,> > Quite honestly, I haven't heard any
definitions of robust at this forum. Lot's of folks are willing to
say: "This is not robust...", but I have asked for specifics and
definitions and nobody is supplying the answers. The system and how
it's traded is not the issue. This is exactly why I decided to
present the CMO5 on ETF's. The concept isn't new and the data is
OOS. Without any tweaking or modification, the approach continues to
produce a reasonable equity line. > > Would you like
for me to comment on the deviation of the equity from a chosen linear
regression? Fred mentioned it would be nice to see an equity curve
(and there is one on each chart that I sent) and that should count for one
of Mark's nine robust measures.> > Since, I'm not bright enough
to even guess at nine measures of robustness (and so far, Mark hasn't
shared), I must rely on simple bench marks: how does it perform over
8,000 issues, how does it perform in different markets (futures, equities,
ETF's), how does it perform in different time periods, max eod dd's, max
neg. excursions, avg. win/avg. loss, expectancy, blah, blah, blah.>
> Did I miss something or did someone actually define robust? If
so, I hope it was better than the optimizing thread. Testing is
necessary, optimizing is a spiraling death trap (unless you name has
DT as initials...then you understand the trap and play the game on the
edges of the black hole). > > The CMO5 is a dandy
indicator and the rules that I apply to trigger the trades are
simplistic. Certainly, anyone with decent software can
better the results (well, maybe). The trick is to modify the
approach ... without over-optimizing (tough trick).> > If
over the next six months, this system, with it's defined triggers, trades
the DIA, QQQ, and SPY with decent profits...is it robust? How many
years must it continue to produce steady results before it can be called
robust? If we look back ten years from now, and it has performed as
it has in the last four years, is that robust? Must it also show the
same kind of results in silver, bonds and soybeans? If it performs
on EOD, data ... must it also knock em dead in one minute time
frames? > > Here's a different view: If a system
performs OOS for a period (x) of time and continues to perform into the
future, without adjustments...then I hereby declare that it is
robust. Why? Because, just like technical analysis:
every input, that can be considered, is discounted by an issue's
price. In technical analysis, we discount all the information that
flows in, out and around a stock and only consider the price. So,
why not just judge a issue's robustness by strictly pegging it to OOS
results? Period. If these ETF's continue to produce steady
results for the next five years, I expect someone to say: "Well,
maybe these ETF's with the CMO5 performed well for the past eight years,
but by my definition, this is not robust". > > I'm still
waiting for the naysayers to define robust and to post a system that can
be monitored for results. The CMO5 is the default indicator that I
use to demonstrate the character of momentum oscillators. Many of us
have come to realize that the indicator is not the most important piece of
the puzzle. The grail is not a silver or gold chalice.
> > Robust and optimizing are difficult terms to define.
Any definition can be argued. Robust is like beauty. My wife
is beautiful (my subjective opinion). You might find her
unattractive. > > The real silly part is that people want
to argue whether something is robust or not. The rubber meets the
road when you trade. Try flipping around sizeable accounts with
something that is not robust... money flies away. > >
Sorry that I haven't been able to answer your question. Why don't
you direct you question to Mark. He has a nine point plan to
evaluate what is or is not robust. Is there a possibility that one
might over-optimize robustness?> > Take care,>
> Steve> > ----- Original Message -----
> From: Dave Merrill > To:
amibroker@xxxxxxxxxxxxxxx > Sent: Friday, October 31, 2003
12:33 PM> Subject: RE: [amibroker] Robustivity>
> > thanks for the specifics, glad to have 'em, even
though that's not what I was trying to ask (:-)>
> what I'm most interested in isn't the system itself, but
what you did to convince yourself that it's robust. the way it was posted
implied that you disagreed with other ideas of robust-ness/ivity
floating around here, so I'm trying to find out what your approach
is.> > dave> >
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.>
> > Send BUG REPORTS to
bugs@xxxx> Send SUGGESTIONS to
suggest@xxxx>
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