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[amibroker] Re: On Robustness, Post #1



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Robustness Criteria, Condensed 1-5.

1. Test on small, mid & large cap stocks in bull, bear & sideways
markets.  
2. Evaluate performance on top 20% most actively traded small, mid &
large cap stocks.
3. Graph and evaluate system performance consistency (%profit/trade
and % profit/bar) on select stocks.
4. Perform simulation to estimate probability of profit in 10 trades
(for select stocks).
5. Perform simulation to estimate future drawdown (for select stocks).

--- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> At the moment I'd settle for having a one line description of #2 -
#8.
> 
> --- In amibroker@xxxxxxxxxxxxxxx, "leonardot19" 
<leo.timmermans@xxxx> 
> wrote:
> > Hi Anthony, Mark,
> > 
> > This is a good idea. This will allow for the less gifted, like 
> myself 
> > (lol) to follow more closely.
> > 
> > Thanks
> > Leo
> > 
> > 
> > --- In amibroker@xxxxxxxxxxxxxxx, "Anthony Faragasso" 
> <ajf1111@xxxx> 
> > wrote:
> > > Mark,
> > > 
> > > Thanks for the thread....How about exploring each of your 9 
> points 
> > of
> > > Robustness with a sample simple System....then (you / we ) can 
> > apply each
> > > point to this sample system....with your direction....and
discuss 
> > why this
> > > system would be accepted or not as pertains to the specific 
> point...
> > > 
> > > Anthony
> > > 
> > > 
> > > ----- Original Message ----- 
> > > From: "quanttrader714" <quanttrader714@xxxx>
> > > To: <amibroker@xxxxxxxxxxxxxxx>
> > > Sent: Sunday, November 02, 2003 11:13 AM
> > > Subject: [amibroker] Re: On Robustness, Post #1
> > > 
> > > 
> > > > Hi Dale,
> > > >
> > > > Good question.  When someone posts something and I want to 
> check 
> > it
> > > > out (I actually run at least the lite version on almost 
> everything
> > > > posted here), I initially use their numbers.  If I want to 
> explore
> > > > further I optimize (lol) the system on a different database, 
> plot 
> > the
> > > > optimized parameters against performance measures and choose
a 
> set
> > > > of values that seems robust by eyeballing the graphs.  When I
> > > > wrote: "Test *unoptimized* system on small, mid & large cap 
> > stocks in
> > > > bull, bear & sideways market conditions, same parameters for 
> all" 
> > I
> > > > was really trying to say, don't make a special case for each 
> mkt 
> > cap
> > > > and mkt condition subtest by optimizing, use the same 
> parameters 
> > for
> > > > all subtests.
> > > >
> > > > Regards,
> > > >
> > > > Mark
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx, "dingo" <dingo@xxxx> wrote:
> > > > > Thanks for the post MF2!
> > > > >
> > > > > Given Steve's example of the CMO5 which I assume is coded
to 
> > detect
> > > > the
> > > > > cross of the indicator thru a value, how would you
determine 
> > that
> > > > value
> > > > > for your intial testing?  This is the case below where you 
> > say "Test
> > > > > *unoptimized* system on small, mid & large cap stocks in 
> bull, 
> > bear
> > > > &
> > > > > sideways market conditions, same parameters for all"
> > > > >
> > > > > Thanks!
> > > > >
> > > > > d
> > > > >
> > > > > -----Original Message-----
> > > > > From: MarkF2 [mailto:feierstein@x...]
> > > > > Sent: Saturday, November 01, 2003 2:50 PM
> > > > > To: amibroker@xxxxxxxxxxxxxxx
> > > > > Subject: [amibroker] On Robustness, Post #1
> > > > >
> > > > >
> > > > > 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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> > > > >
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