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I have the same question regarding what you are refering as "sound
theory" . The bottom line is does it make you money?
--- In amibroker@xxxxxxxxxxxxxxx, "bvandyke" <bvandyke@xxxx> wrote:
> 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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