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Hi Gary –
I was thinking of looking at the recent
trades in the out of sample period. We can get an idea of what the possible
distribution of various metrics are by looking at the in sample results. But
the out of sample results are (almost) always less profitable, have a lower
ratio of wins to losses, etc than the in sample results. One technique I
use is to run a quick and dirty monte carlo program I wrote in Basic that gives
the likelihood of various metrics – such as the proportion of winning
versus losing trades. If the out of sample results start falling in the
area of the distribution that is “unlikely”, then I have a warning
that the system may be broken.
Howard
-----Original Message-----
From: Gary A. Serkhoshian
[mailto:serkhoshian777@xxxxxxxxx]
Sent: Sunday, November 09, 2003
11:33 AM
To: amibroker@xxxxxxxxxxxxxxx
Subject: RE: [amibroker] On
Robustness, Post #1 : TO HOWARD
<span
>Howard,
<span
>
<span
>Thanks
for the detailed response. Helpful as always.
<span
>
<span
>Regarding
your comment:
Other techniques could be comparison of
various metrics of recent trades with the probabilities that those results come
from a system that is healthy or broken.
<span
>Can we
come to this conclusion by looking at frequency distributions of the
metrics in question during the IS period?
<span
>
<span
>Thanks
again,
<span
>Gary
Howard Bandy
<howardbandy@xxxxxxxxx> wrote:
Hi Gary –
One -- Yes, the presidential
election cycle has strong biases. This year, year 3, is traditionally an
up year. I mentioned the presidential cycle as an example to ward off
the flames that might come from suggesting a crystal ball approach to
model selection.
Two -- I have done quite a bit of
research into use of analysis of the equity curve as a feedback mechanism to
help determine the health of a system. Other techniques could be
comparison of various metrics of recent trades with the probabilities that
those results come from a system that is healthy or broken.
Three -- As I have mentioned in
posts to this board and to HolyGrailSM, I believe several things are true of
markets and systems. Not everyone on this list agrees with me on these
points, so you’ll read some other opinions..
<span
>Entries and exits need not be
symmetric. In the equity markets, drops are much steeper in slope
than rises, so the parameters used to recognize them in the same number of
bars are different.
<span
>A good system need not trade
all, or even a large portion, of tradables well.
<span
>Markets change dramatically
over time. It is very difficult to design a system that trades
profitably over a long time period, particularly when the market
characteristics change within that period.
<span
>Systems that once worked well,
then fail, will probably not work well again.
Howard
-----Original Message-----
From: Gary A. Serkhoshian
[mailto:serkhoshian777@xxxxxxxxx]
Sent: Wednesday, November 05, 2003
9:15 PM
To: amibroker@xxxxxxxxxxxxxxx
Subject: RE: [amibroker] On
Robustness, Post #1 : TO HOWARD
<span
>Howard,
<span
>A few
questions regarding your post to Dave
< 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. >
<span
>Regarding
the 4-year cycle, are you specifically referring to year 3 (the year that is
coming to an end) ? I've read year 3 since WWII has been profitable to
the tune of 15% on avg. Any other cycles you'd suggest to follow?
< 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. >
<span
>Which
failsafe mechanisms do you prefer? I've been looking at a DD
"floor" or perhaps a factor of MaxDD to turn off the system. I
believe Dimitris has suggested a downslope in the 100MA of equity curve which
makes sense, too.
< 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 >
<span
>What
you're describing is essentially that buys and shorts can not be
symmetrical. Is that right? What are the primary things that
differentiate up moves from down moves that require the need for asymmetry of
signals.
<span
>Thanks
for the post, as this subject is scratching where I itch in my eduction of
system development and optmization.
<span
>Kind
Regards,
<span
>Gary
Howard Bandy
<howardbandy@xxxxxxxxx> wrote:
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>>>
<font size=3
face="Times New Roman">
Send BUG REPORTS to bugs@xxxxxxxxxxxxx<font size=2
face="Courier New">
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to:
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--------------------------------------------
Check group FAQ at: <a
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size=2 face=Arial>
Howard Bandy <howardbandy@xxxxxxxxx>
wrote:
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>>>
Send
BUG REPORTS to bugs@xxxxxxxxxxxxx<font size=2
face="Courier New">
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to:
amiquote@xxxxxxxxxxxxxxx
(Web page: <a
href="">http://groups.yahoo.com/group/amiquote/messages/)
--------------------------------------------
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href="">http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of
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<font size=3
face="Times New Roman">
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face="Times New Roman">Do you Yahoo!?
Protect your identity with
Yahoo! Mail AddressGuard
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>
<span
>
<span
>
<span
>Send BUG REPORTS to
bugs@xxxxxxxxxxxxx<span
>
Send 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.<span
>
<font size=3
face="Times New Roman">
<span
>Do you Yahoo!?
Protect your identity with
Yahoo! Mail AddressGuard
<font size=2
face="Courier New">Send BUG REPORTS to
bugs@xxxxxxxxxxxxx<span
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Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
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