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Hi Pal,
Can you help me understand please what you mean by selecting systems
on "sound theory", as opposed to selecting systems based on past
objective data regarding their profitability? Thanks.
Bill
--- In amibroker@xxxxxxxxxxxxxxx, "palsanand" <palsanand@xxxx> wrote:
> Hi,
>
> In my view, it is misleading to exclude individual systems using
past
> measures of profitability like APR, Annual trades, Percent Wins,
> etc., because these statistics may disprove that a system has
been
> unprofitable in the past, but cannot prove that it may be
profitable
> in the future. I would select systems based on a sound theory,
not
> arbitrary systems which has no solid theoretical foundations...
>
> rgds, Pal
>
> --- In amibroker@xxxxxxxxxxxxxxx, "MarkF2" <feierstein@xxxx> wrote:
> > This is in response to DT's and others' requests to provide more
> > details on my 9 robustness criteria.
> >
> > First some administrative anouncements, lol. I've decided to
> provide
> > them one-by-one, first due to my time constraints, second
because I
> > feel that's the best way to discuss them and third because I
want
> to
> > see how this goes. I welcome all constructive debate,
especially
> > opposing views supported by quantitative analysis. But if this
> > degenerates into a flame war, I've got better things to do with
my
> > time. Treat me with respect and I'll treat you with respect.
> There
> > seems to be a lot of interest in this topic, so let's please
have a
> > collegial and productive discussion. This is post 1 of 9 (not
> > counting the dialog inbetween, let's see how far we can get :-).
> >
> > Why care about robustness? For whatever reasons, markets
change.
> We
> > could spin our wheels forever discussing time series theory,
serial
> > dependencies, random walk, nonstationarity, etc., like
academicians
> > do and get nowhere (as they do), or we can try to cut through
the
> crap
> > and deal with it (the simple fact that markets constantly
change).
> > My weapon of choice is robustness. You could say I have a
> robustness
> > obsession and my criteria are overkill. But that's my choice
and
> > you're free to make your own on how far you want to take this,
if
> at
> > all.
> >
> > OK, I lied. There will be some, very light discussion of
> statistics
> > because some criteria are steeped in statistical theory. But
most
> > can be reduced to simple, mechanical procedures that can be
graphed
> in
> > a spreadsheet and visually and intuitively interpreted. Others
> > require simulation software and one requires proprietary
software
> but
> > we'll cross that bridge when we come to it.
> >
> > Speaking of proprietary, there are some things I simply won't
> > disclose, such as specific parameters for certain criteria. So
> please
> > respect my wishes and don't ask. I have my reasons. So
evaluate
> this
> > on your own and decide for yourself what place, if any, the
criteria
> > have in your trading. They work great for me but I make no
claim
> that
> > they're the Holy Grail of robustness and am sure that some of
you
> will
> > come up with better ideas if there's enough interest and
> discussion.
> >
> > With that long winded intro, here's Criterion #1:
> >
> > Test *unoptimized* system on small, mid & large cap stocks in
bull,
> > bear & sideways market conditions, same parameters for all. I
use
> > the stocks of the S&P 600, 400, and 500 indices and 2 year bull,
> bear
> > and sideways periods (for a total of 6 years per stock).
Rationale
> > behind this: to find systems that profitably *tested out in the
> past*
> > on a large number of (somewhat tradeable) stocks of varying
market
> > caps in multiple sectors under different market conditions,
under
> the
> > assumption that this indicates the system is robust enough to
> > profitably *trade select issues in the future*. More on robust
> issue
> > selection in later criteria. Looking for net profitability on
all
> mkt
> > cap and mkt condition subtests, and profitable on the majority (>
> > 50%) of issues in each subtest, the more the better. Sometimes
I
> cut
> > a system some slack if it's close on one or two subtests, it's a
> > judgement call. My commission setting(s) in AB: proprietary,
based
> > on my *slippage* research using data from actual trades. But you
> > could choose an arbitrary say, 1% to get started. Date settings
for
> > my 2 year intervals: proprietary but you can easily find your
own
> by
> > eyeballing a chart of a major index. Just use the same ones each
> > time so you compare apples to apples. My lite version of this
is 2
> > year bull and bear periods on the ND100 and SP100 stocks, which I
> > sometimes run as a quick pre-screen. Next time someone posts a
> system,
> > run it through the lite or full version. Or test the systems in
the
> > AFL library. The more systems you run through, the more
intuitive
> of
> > a feel for robustness you'll get. Note that I'm *not* saying
you
> > shouldn't or can't successfully trade something that doesn't meet
> > this standard, lol. That's obviously not true! I was asked to
> > explain my robustness criteria and that's what I'm doing.
Period.
> > This criterion is a post-Amibroker creation, BTW. Pre-Amibroker
I
> had
> > a small test portfolio of diverse issues I used instead and it
did a
> > decent job. I run this now because I now (easily) can, *many*
thanks
> > to Tomasz. If you're thinking, geez, why bother with this, ask
> > yourself a simple question. *All else being equal*, would you
feel
> > more confident trading (with your money) a system that passes
this
> > test or one that fails it?
> >
> > Regards,
> >
> > Mark
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