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Fred,
What would be the red flag that it is reoptimization time?
Thanks,
GaryFred <fctonetti@xxxxxxxxx> wrote:
In general I would agree with the concept that the liklihood of good out of sample or real time system performance is indirectly proportional to the number of parameters, but there ARE exceptions to this general rule at least as applied to what some would term to be expert systems. A case in point is a system I use every day and has had for years as good out of sample, real time performance as it had in sample. It has 27 parameters. I haven't reoptimized in at least 18 months because there was no reason to.--- In amibroker@xxxxxxxxxxxxxxx, "palsanand" <palsanand@xxxx> wrote:> My primary trading system is very simple in the sense that it has > only one parameter (the lookback MA period), and it generally leads > to a robust system. It is objective (non-optimized and parameters > are never
subject to change) and unique in the sense it is both trend-> following (continuation of a previous trend or breakout) and counter-> trend following (start of a new trend) at the same-time. The trend > and counter-trend following features of the MA based systems are > highly desirable because it resists becoming outdated as markets > change character (personality). Independent of the fundamentals > driving the market, these features are designed to capture extended > runs in both bullish and bearish directions. The Verification and > Interpretation of the signals Detected by this system was a great > challenge, but I was able to use good filters (OB/OS) and use > Volatility (non-trend component of a signal) to optimize my entry > points. A robust system can be categorized as one that stands a good > chance (probability) of working in the future as it has worked in
the > past, i.e, it is tough (able to handle all markets and conditions > regardless of size and nature) and long-lasting (durable).> > As discussed in a recent STOCKS & COMMODITIES article by Jeffrey Owen > Katz and Donna McCormick, a rule of thumb in evaluating trading > systems is that the more parameters a system has, the less robust the > system is. Taken to the extreme, many fitting parameters can be used > to curve-fit past data to eliminate all whipsaws while maintaining > good performance. The potential of such a system working in the real > world is nil...> > rgds, Pal> --- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx> > wrote:> > agreed. if the fact that a trading system did well in the past has > no> > bearing whatsoever on whether it does well in the future, how can > we know> >
anything at all about the future performance of a proposed trading > system?> > > > dave> > > > The gambler”Ēs fallacy is a fallacy because the gambler ignores > the> > independence of the outcomes and looks for patterns that do not > exist. If> > we have designed trading systems based on recognition of patterns > that> > precede profitable trading opportunities, and if those patterns are> > persistent, then we no longer have random, independent outcomes. > Our> > trading systems do have serial dependencies and upward sloping > equity> > curves. So analysis of the equity curve provides an indication of > the> > health of the trading system.> > > > > > > > HowardSend BUG REPORTS to bugs@xxxxxxxxxxxxxSend
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