|
PureBytes Links
Trading Reference Links
|
Pal, what you say is OK theoretically. However, in trading, the only real
theory that applies is supply and demand. How one views that theory is what
makes the trading world go round and round. What may seem contrarian to you may
be the opposite to someone else. Thus, everything in trading is empirically
based, and you can make lots of money using empirical principles (and, of
course, lose lots, too). That's why statistical analysis is so important when
making trading decisions. You have to take into consideration the errors
involved in your observations and the probability of being right based on past
performance. You calculate your expectancy based on the % of winners and the
average win:loss ratio. If you have a positive expectancy, in the long run you
will make money if you are disciplined. If you know things like maximum dd,
expectancy, W/L ratios, based on your extensive backtesting, you can apply Monte
Carlo simulations (MCS) to your system to verify its robustness over
thousands of statistical trials. If the MCS results still give you acceptable
results you can live with, then you can probably proceed with trading it with
real money. But all of this is empirical, not theoretical. And it's legit, too.
Practice without fundamental theory is not impossible. People do it all the
time. As Joe said, the bottom line is, does your system make money? If it
does, who cares if there is not an underlying theory to what you are doing?
Al Venosa
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
palsanand
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Saturday, November 01, 2003 8:39
PM
Subject: [amibroker] Re: On Robustness,
Post #1
Hi,Practice without theory is impossible, theory
without practice is useless... I believe in the "Contrarian theory"
and all the systems I ever developed are built around it. The only
reason prices move is because of an imbalance between buyers and sellers,
between supply and demand. Price tends to equalize supply and
demand. That's why "contrary opinion" works. If everyone
thinks an underlying instrument is going up, that is because they all own
it. Since there are a very few buyers at the current price, it takes
very few sellers to drive it down....rgds, Pal--- 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
Send BUG REPORTS to bugs@xxxxxxxxxxxxxSend SUGGESTIONS to
suggest@xxxxxxxxxxxxx-----------------------------------------Post
AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx (Web page: <A
href="">http://groups.yahoo.com/group/amiquote/messages/)--------------------------------------------Check
group FAQ at: <A
href="">http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of Yahoo! Groups is subject to the <A
href="">Yahoo! Terms of Service.
<BLOCKQUOTE
><FONT
face="Courier New">---Outgoing mail is certified Virus
Free.Checked by AVG anti-virus system (<A
href="">http://www.grisoft.com).Version: 6.0.525
/ Virus Database: 322 - Release Date:
10/9/2003
Yahoo! Groups Sponsor
Send BUG REPORTS to bugs@xxxxxxxxxxxxx
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx
(Web page: http://groups.yahoo.com/group/amiquote/messages/)
--------------------------------------------
Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
|