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I believe that you need
different parameters, if not different conditions for the various type fo
shares. The charts behave differently for large, mid and small cap stocks, or
maybe should say those that are driven by the instos and those that are
speculative by nature. The speculative stocks tend to be faster moving, often
with large gaps or dominant candle moves, larger caps tend to be slower moving.
So even a simple system can be too late for the specs, but on time for the
larger stocks.
Cheers,Graham<A
href="">http://groups.msn.com/ASXShareTrading<A
href="">http://groups.msn.com/FMSAustralia
<FONT
face=Tahoma size=2>-----Original Message-----From: Al Venosa
[mailto:advenosa@xxxxxxxxxxxx] Sent: Sunday, 2 November 2003 11:28
AMTo: amibroker@xxxxxxxxxxxxxxxSubject: Re: [amibroker]
On Robustness, Post #1
Test *unoptimized* system on small, mid & large cap stocks in
bull, bear & sideways market conditions, same parameters for all.
Mark: I agree up to a point.
However, I'm not convinced that a system must perform equally well across all
markets using the same parameter values, as you suggest. For example, if your
system performs admirably on the large cap stocks but not on the small cap
stocks, and within the large cap group the parameter values are robust in and
of themselves (i.e., no local maxima on the response surface diagram), why not
trade the system on large cap stocks? Also, if you optimize the same system on
small cap stocks and find the parameter values are different from the large
cap parameters but are robust, why not use those different parameters for the
small cap issues? Why do the parameter values HAVE to be the same for all
market types?
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*.
What I like to do is optimize
over a period that encompasses BOTH bullish AND bearish periods at
the same time, like 1/2/99 to 12/31/01 or 02 as opposed to selecting separate
2-year bullish and 2-year bearish periods. Usually, systems have a short
component and a long component to them (unless you only like to trade either
long or short per se). So, optimizing the parameters in a trading period
that includes both bull and bear market action lends a certain degree of
robustness in and of itself if you find a reasonably flat response surface.
Then, when you test in the succeeding OOS period and get a reasonable
performance similar to the IS period, with no local maxima in the 3-D space of
the trading diagram, then you have a fairly robust system in my mind.
...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.
What about setting 0
commissions just for starters when developing your system. After you have done
sufficient optimizing and forward testing, then set your commissions/slippage
to your 1% or 0.5% or whatever and then see if the system crashes. If it does,
trash it.
<FONT face=Arial
color=#000080>
Looking forward to your
remaining 8 posts.
<FONT face=Arial
color=#000080>
Al
Venosa
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