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Hi Dave –
Good posting. I’d like to
comment on your last paragraph.
<font size=2
face="Courier New">- if one system does better
in bull years and another in bear, the one that<font size=2
face="Courier New">
does better in reality will depend on the
proportion of bull and bear years
that actually occur. when we weight bull, bear and
sideways markets equally,
are we matching their proportions in real life?
what time frame would we
want to base that judgment on?
It seems there are three approaches to
take.
One – we design two systems, one for
bullish periods, the other for bearish periods. Then we look into our
crystal ball and use the system with the upward bias if we have some idea that
the near future will be bullish, and use the system with the downward bias if
we have some idea that the near future will be bearish. This is not
wholly a dream. For example, there are strong seasonalities in the US
four year presidential cycle.
Two – we design two systems, one for
bullish periods, the other for bearish periods, and include failsafe mechanisms
in both. Then we trade both systems and let the system that works make
money while the system that doesn’t work recognizes that it doesn’t
work and stays flat.
Three – we design a system that is
profitable in both bull and bear periods. I think this is the hardest to
do, since the markets act so differently that it requires additional parameters
to be able to recognize the additional patterns. In my experience,
systems designed to do well in both bullish and bearish periods do not do exceptionally
well in either period.
Howard
-----Original Message-----
From: Dave Merrill
[mailto:dmerrill@xxxxxxx]
Sent: Monday, November 03, 2003
7:06 AM
To: amibroker@xxxxxxxxxxxxxxx
Subject: RE: [amibroker] On
Robustness, Post #1
some robustness issues that have been rattling around in my head over
the
weekend...
<<<SNIP>>>
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