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Thanks, DT. You use the same online dictionary as I do: Gurunet.exe. Very
nice program. I also appreciate the reference to Julius Caesar because I learned
yet another new word from you, Cisalpine (south of the Alps). In regards to
aleatory, I prefer the first definition in reference to trading rather than the
one ascribed to music.
Regards,
Al Venosa
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
DIMITRIS
TSOKAKIS
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Friday, October 31, 2003 4:42
PM
Subject: [amibroker] Re: Robustness (was
Robustivity)
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 ... <A
href="">http://www.digonsite.com/drdig/greece/65.htmlAlthough
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, <A
href="">http://education.yahoo.com/reference/dictionary/entries/79/a0187900.htmlADJECTIVE:
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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