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Pal:
Sorry, but I changed the title to something that can be searched on.
Anyway, I write this because I read with interest an idea that I believe Chuck
expressed this morning in an unrelated post. Suppose your watchlist is composed
of, say, the Nasdaq 100 (N100) (it could be anything; this is just an example).
Divide the N100 stocks into 2 50-stock watchlists by randomly selecting 50
stocks from the N100 for each watchlist. Then, do your development/optimization
on one of the 2 watchlists for 1999 to Dec 2003 (present time). Then, use the
optimized parameters plus the OTHER watchlist for your "walk-forward"
testing. This way, you use the entire date range but you test the system's
validity or robustness on another watchlist that has never seen the parameters
or the system at all. If the system performs as well or better on the second
watchlist as it did on the one used for the optimum parameters, then you may
conclude you have a tradeable system. I'd like to hear others' opinions as to
the validity of this approach. Any thoughts?
AV
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----- Original Message -----
<DIV
>From:
palsanand
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Saturday, December 13, 2003 5:38
PM
Subject: [amibroker] Re: question/
help
I would point you to the following article:Walk
Forward Tested System Is Better than the BestOptimized One - Larry
WilliamsIt looks like the history of technical analysis has been
largely influenced by optimization. That is, we studied the past, found
something that looked significant, then optimized rules and procedures
to trade the observation in the future.Sometimes that has worked.
Often it has not. That's our dilemma. What are we to do? In the past, we
answered these questions by doing more optimization, more curve fitting.
Indeed, we treated historical data like prisoners of war. Our thesis was,
if you beat them often enough they would reveal anything. Which is true,
but you want them to reveal everything, not anything.This brings
me to one point. I think we will all make much more headway with system
development by spending less time on optimization and more time on walking
systems and procedures forward.If on a walk forward test, the system
holds up, we probably have something. And for sure, what we have will be
better than the very best optimized system when it comes to real time
trading. Hence, let's see what we can learn from each other about
conducting walk forward tests. Any ideas will be appreciated by all, I am
certain - L.W.It's certainly correct that if done properly, walk
forward testing has great value. For those of you not aware of walk
forward testing, it's first setting your system parameters and then
testing the results in the future using those pre-set parameters without
benefit of additional or new optimization (re-optimization). Some people
refer to that as "hypothetical real-time trading."However, walk
forward testing can in fact be a trap if done incorrectly. That's because
there's a problem in deciding what pre-set algorithm or parameters to use
prior to the so-called walk forward test. If we arrive at those parameters
by an optimization process, then we may be guilty of optimizing the walk
forward test without even realizing we have done that. Another pitfall, is
the great tendency to optimize the walk forward testing time period
itself.Possibly the only way to do it correctly, is to first
arrive at a set of parameters and algorithm based on logic, experience, or
sound trading principles that won't be subject to change. Then do a walk
forward with no attempt to improve results via re-optimization.A
robust system is one that uses the least amount of parameters and still
has a good chance of being profitable in the future with atleast 30
trades/year to be statistically significant with the in-sample testing
period of atleast say, 15 years to minimize the possibility of chance or
chance alone being responsible for the excellent results -
Palrgds, Pal--- In amibroker@xxxxxxxxxxxxxxx, "goldwing01"
<GOLDWING01@xxxx> wrote:> Has any tried using databull for
downloading data, it seems to look > better than yahoo or a least
relieving yourself from the stress of > downloading problem.>
> Next question, optimization, why do I need to optimize my data and
> when should I optimize my data > > Next question, I
would like to have one screen to constantly look at > ^IXIC and
another to move as I point and click at other symbols can > someone
help with this please.
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