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Hi
Thomas,
<FONT face=Arial color=#0000ff
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I see
that I have you thinking. I'll address your
questions.
<FONT face=Arial color=#0000ff
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<FONT face=Arial color=#0000ff
size=2>1. Yes, I am (was) trading about half of these
systems.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>2. Since they were specifically developed for the N100 stocks, I
only use them against those stocks.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>3. I will attempt to come up with systems that trade the N100
(using more accurate watchlists), but I don't hold out much hope.
Most, if not all, of my systems use ranking. With only 100 stocks to
select from, it is hard to find more than 3 or 4 to trade (using my
criteria). Three or four stocks (IMO) simply doesn't give me the
diversification that I think is required. The drawdowns are too
heavy.
<FONT face=Arial color=#0000ff
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<FONT face=Arial color=#0000ff
size=2>4. I tracked the performance since trading live.
However, it is impossible to compare results of live trading over a few months
with backtested trading over nine years.
<BLOCKQUOTE
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<FONT face="Times New Roman"
size=2>-----Original Message-----From: Thomas Chan
[mailto:tchan@xxxxxxxxxx]Sent: Tuesday, December 30, 2003 12:45
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: RE: [amibroker]
The demise of 23 systems...
<SPAN
>Chuck,
<SPAN
>
<SPAN
>
If I may ask, do you run many of these 23 systems concurrently in your real
life operations? If yes, do you run them ONLY on N100 issues? Or on your whole
universe, knowing that you backtested them against current N100
only.
<SPAN
>
Also, with your new findings, are your going to throw them all out (of course,
you might just do some modifications) and start developing new systems base on
the new setups?
<SPAN
>
You must have tracked the performances before and after the backtest period;
can you say that the new findings more accurately reflect the real life
performance?
<SPAN
>
<SPAN
>
Thanks.
<SPAN
>
<SPAN
>
<SPAN
>Thomas
<SPAN
>
<SPAN
>-----Original
Message-----From: Chuck
Rademacher [mailto:chuck_rademacher@xxxxxxxxxx] <SPAN
>Sent: Tuesday, December 30, 2003 4:05
AMTo:
amibroker@xxxxxxxxxxxxxxx<SPAN
>Subject: [amibroker] The demise of 23
systems...
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size=3>
<FONT face=Arial color=blue
size=2>I
thought that I would share the following with you. Perhaps you can
see how the results of my research may affect your own
systems?
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<FONT face=Arial color=blue
size=2>I had
what I thought to be 23 "good" to "very good" systems that I backtested
against a current NASDAQ 100 watchlist. After spending
two days updating symbols and accounting for de-listed stocks, I came up with
nine separate watchlists, as at January 1 each year between 1995 and
2003. Thanks to some of you, I modified my AFL to make sure that I
used the correct watchlist depending on the date. The results...
not one of my 23 NASDAQ 100 systems now backtest with acceptable
performance. Many went from nice, positive returns with low drawdowns to
negative returns and almost total loss of capital.
<FONT face="Times New Roman"
size=3>
<FONT face=Arial color=blue
size=2>What
does it all mean? IMO, working with only a current NASDAQ 100
watchlist can give you a real sense of false security. Not only
are de-listed stocks not in the current list, but many of those de-listed
stocks had lacklustre performance before their demise.
<FONT face="Times New Roman"
size=3>
<FONT face=Arial color=blue
size=2>I
encourage you to think about the impact of using only a current watchlist,
regardless of how that list is constructed, for backtesting
purposes. I see it all the time. System designers
create watchlists of high-beta or high-yield or low P/E or whatever stocks
based on current information to backtest a system starting perhaps five years
ago. Think about it!
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