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Hi Jitu,
--- In amibroker@xxxxxxxxxxxxxxx, "jtelang" <jtelang@xxxx> wrote:
> Mark,
>
> I read your last two posts twice, and am having a tough time
> understanding what you're saying... You said following in your
first
> post -
>
> > Then backtest on a random sample of issues drawn from the
> > population of all stocks trading at the *start* of the period
> > you're backtesting on. And oh, by the way, don't use *any* of
> > this data to develop your system(s) because it theoretically
> > didn't exist when you created them.
>
> What do you mean by "don't use any of this data..."? And what do
you
> mean it didn't exist when you created them? What is "them"?
Here I was talking about eliminating bias by not using data to create
a system that theoretically was not available when the system would
have been created.
> And in this last post -
>
> > benchmark for *select* stocks from the population of stocks
trading
> at
> > the start of the analysis period. I say select because, as you
> know,
> > N100 stocks are limited to non-financial companies listed on
> NASDAQ.
Here I was only saying how I'd *quantify* the N100 list "success
story." For example, compare 98-03 buy and hold stats for *current*
N100 stocks to the 98-03 buy and hold stats for the N100 eligible
stocks *of 98*.
> If the point is to limit your trading to N100 stocks, what's the
> point in making sure that the backtest *also* works equally well on
> some other (non-N100) select stocks? No doubt, if you can make both
> happen (i.e. make it work equally well on random stocks as well as
> N100 stocks), then it's obviously great. But then you're
effectively
> eliminating any system that might work (for whatever reason) only
> when it comes to N100 stocks, but not when entire universe is
> considered. Are you saying such a beast can't exist? I, for one,
> might lean towards agreeing with it, especially given Chuck's
> comments as well as my own findings, but I hardly think one can
> *conclusively* say so. Besides, if one really created accurate N100
> lists for past data, and develops a system that seems to trade them
> well in the past, should it be tossed out?
>
> I guess I'm trying to understand if your basic argument is -- any
> system that backtests only using a group of stocks such as N100, no
> matter how accurate the data and lists were, are not something one
> should trade, because they were not backtested on non-N100 stocks.
> Wasn't entirely clear if that's what you're saying.
My basic point is that IMO, it's much easier and safer to trade the
current N100 stocks with simple robust systems.
Mark
> TIA,
>
> Jitu
>
> --- In amibroker@xxxxxxxxxxxxxxx, "quanttrader714"
> <quanttrader714@xxxx> wrote:
> > Chuck,
> >
> > I've been following this thread and first let me thank you for
> > sharing. It's always good to see a reminder that trading isn't
> easy,
> > especially from someone with your experience. This is a complex
> topic
> > with many moving parts and I think that different people have
> > different things in mind when discussing it (myself included,
lol).
> > You mentioned the current N100 list "success story" and I'd
quantify
> > this by looking at a benchmark for measuring it that is
*unaffected
> > by distortion from a system* (such as buy and hold profit) vs the
> same
> > benchmark for *select* stocks from the population of stocks
trading
> at
> > the start of the analysis period. I say select because, as you
> know,
> > N100 stocks are limited to non-financial companies listed on
> NASDAQ.
> > Then there's the broader issue of survivorship bias which I'd also
> > quantify without system distortion but can be avoided by acting
only
> > with information known at the time. What I *think* you did was
try
> to
> > simulate the past with a one-frame-a-year rolling window of the
> > N100 for your N100 systems (whatever they are). I'm not sure what
> > your results show about the N100 list success story or
survivorship
> > bias because of all the confounding variables that what I think
> you've
> > done introduces. But what I personally take away is another
> argument
> > for trading robust systems.
> >
> > Mark
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
> > <chuck_rademacher@x> wrote:
> > > Jayson,
> > >
> > > Where do I begin? First, let me put your mind at ease and
tell
> you
> > that I
> > > am successfully trading numerous systems against the entire
> > universe of
> > > stocks. Suffice to say that I have a 40-year track record
> trading
> > my own
> > > as well as other people's money. As I mentioned in my earlier
> > email, I
> > > became frustrated by the fact that many people in this group
were
> > getting
> > > such good backtested results from systems applied to the N100.
> > >
> > > My N100 systems being discussed performed very well in the last
> > year, not
> > > poorly as you suggest. They performed very well for several
> years
> > against
> > > the CURRENT N100 list. But, the CURRENT N100 list is a
success
> > story for
> > > those 100 stocks.
> > >
> > > It is my belief that selecting and ranking based on only 100
> stocks
> > simply
> > > won't yield enough qualified buy signals to give good returns
> > without large
> > > drawdowns. By the time I add liquidity and price filtering,
> there
> > may only
> > > be one or two signals at each swing of the overall market.
That
> > simply
> > > doesn't give me an acceptable level of diversfication. Due to
> the
> > size of
> > > the funds that I manage, I need to get off a fair amount of
> dollars
> > in a
> > > fair number of positions in each system in order to play the
game.
> > >
> > > I'll probably just go back to developing and trading systems
that
> > look at
> > > the entire universe, rather than the N100. However, I will
> suffer
> > every
> > > time I hear of someone seeing 2,500% annual returns in
backtesting
> > some new
> > > system on the N100.
> > > -----Original Message-----
> > > From: Jayson [mailto:jcasavant@x...]
> > > Sent: Wednesday, December 31, 2003 3:10 AM
> > > To: amibroker@xxxxxxxxxxxxxxx
> > > Subject: RE: [amibroker] The demise of 23 systems...
> > >
> > >
> > > Chuck,
> > > Thanks for the detailed reply. You certainly have more
> experience
> > system
> > > testing then I but it just seems that if a system "Works" it
> should
> > work on
> > > any given data set at any given time. By this I mean that there
is
> > really
> > > nothing magical about the NAS100 or the SP500, they are just
> stocks
> > chosen,
> > > for a variety of reasons, to be components of an index. If the
> > system looks
> > > at market timing components then a stock will either pass/fail
> based
> > on that
> > > criteria. The same will be true for any additional components
in
> the
> > system.
> > > Why would stock "A" perform favorably while stock "B" does not,
> > after all it
> > > passed the same (series) of tests.
> > >
> > > Time is also a component of testing that tends to confuse me.
> If a
> > system
> > > does poorly over the last 12 months why would you want to test
it
> > over a
> > > longer period? True the system may produce favorable results if
> you
> > had run
> > > it for 10 years but if it is failing for the last year do you
> really
> > want to
> > > be following it? Wouldn't you instead want to be looking for a
> > system that
> > > is behaving better today? If your system begins to fail
wouldn't
> you
> > want to
> > > stop trading it until such time as it begins behaving again?
You
> may
> > miss
> > > out on some winning trades but have you not saved your self some
> > losers in
> > > the process? I have seen posts over the years that indicate
some
> are
> > trying
> > > to use MA's of the equity line as a filter to determine
adherence
> to
> > a given
> > > system. On the surface this seems to make sense to me. Have you
> > done any
> > > work in this area?
> > >
> > > In answer 4 you state that the system will not optimize on the
> > revised
> > > data. Does this not indicate that the system only worked on the
> > stocks
> > > originally tested and therefore its success/failure was actually
> > random?
> > > Pure luck based on the trades taken in the origininal data?
> > >
> > > Over the years I have tested various systems, some simple,
some
> > complex,
> > > and have found the process frustrating. I can build a system
that
> > trades
> > > well on a given universe of stocks. It will trade well on the
the
> > timeframe
> > > I built the system on but when tested over a different time
frame
> or
> > on a
> > > different basket will invariably fall apart. It seems to me
there
> is
> > > certainly an element of luck involved. Perhaps it is a coup[le
of
> > stocks in
> > > the universe the have steadily produced, take them out and ...no
> > joy.
> > > Perhaps a large percentage in the group had a stellar couple of
> > years. Test
> > > out side that run up and again...no joy
> > >
> > > In your follow up you state that you have had little luck
with
> any
> > system
> > > testing less than 1,000 stocks. Do your systems take
significantly
> > more
> > > trades when tested against a large group or are you simply
trading
> > stocks
> > > meeting higher standards based on some type of ranking? If the
> > latter than
> > > perhaps stock selection is key. There certainly is a large
group
> of
> > > believers in this theory over at IBD and at QP/HGS.
> > >
> > > I am sorry to hear your story as I am certain you have
invested
> > lots of
> > > sweat equity into the development of your many systems. I
> sincerely
> > hope
> > > that next year at this time you can share with us your success
> > story.
> > >
> > >
> > > Regards,
> > > Jayson
> > > -----Original Message-----
> > > From: Chuck Rademacher [mailto:chuck_rademacher@x]
> > > Sent: Tuesday, December 30, 2003 12:54 PM
> > > To: amibroker@xxxxxxxxxxxxxxx
> > > Subject: RE: [amibroker] The demise of 23 systems...
> > >
> > >
> > > Jayson,
> > >
> > > I can tell you, but probably not convince you, that the
systems
> > were not
> > > over optimised. However, let me tell you the following so you
> can
> > decide
> > > for yourself:
> > >
> > > 1. All 23 of these systems were long only.
> > >
> > > 2. Each system had between 3 and 6 parameters, including two
> for
> > market
> > > timing.
> > >
> > > 3. The performance of these systems did not fall off a cliff
if
> > any or
> > > all of those parameters deviated in either direction.
> > >
> > > 4. Let's say that they were over optimised. The systems
won't
> > optimise
> > > with the "revised" data.
> > >
> > >
> > > I have to tell you a couple more things:
> > >
> > > 1. I tend to use exactly the same two-parameter market timing
> > methodology
> > > (including parameter values) for more than 120 systems.
> > >
> > > 2. I find that the more stocks I pump into a system, the
more
> it
> > has to
> > > select from and the better the performance.
> > >
> > > 3. I could never get any systems to work to my satisfaction
on
> > less than
> > > 1,000 stocks.
> > >
> > > 4. I certainly could never get any system to work to my
> > satisfaction on
> > > the NASDAQ 100.
> > >
> > > 5. All of my systems work (40+ years) was previously done
> > outside of
> > > AmiBroker where my database knows which stocks belong to which
> index
> > at any
> > > given minute in time.
> > >
> > > 6. I became frustrated with reports of numerous AmiBroker
users
> > having
> > > success with NASDAQ 100 trading systems.
> > >
> > > 7. I created a (current) NASDAQ 100 watchlist and a bunch of
> > systems that
> > > appeared to work.
> > >
> > > 8. I'm actually trading 11 of the 23 systems that I
> mentioned.
> > Well, to
> > > be honest, I was trading them until yesterday.
> > >
> > > 9. Once I tried the more accurate method of determining which
> > stocks were
> > > NASDAQ 100 constituents in AmiBroker, these systems fell apart.
> > >
> > > That's my story... back to the drawing board (unless I want to
> > ignore
> > > using more accurate watchlists).
> > > -----Original Message-----
> > > From: Jayson [mailto:jcasavant@x...]
> > > Sent: Tuesday, December 30, 2003 9:52 AM
> > > To: amibroker@xxxxxxxxxxxxxxx
> > > Subject: RE: [amibroker] The demise of 23 systems...
> > >
> > >
> > > Chuck,
> > > does this suggest that all of your systems were simply curve
> > fitted to
> > > the current nas100? Or perhaps simply over optimized?
> > >
> > > Regards,
> > > Jayson
> > > -----Original Message-----
> > > From: Chuck Rademacher [mailto:chuck_rademacher@x]
> > > Sent: Tuesday, December 30, 2003 7:05 AM
> > > To: amibroker@xxxxxxxxxxxxxxx
> > > Subject: [amibroker] The demise of 23 systems...
> > >
> > >
> > > 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?
> > >
> > > 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.
> > >
> > > 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.
> > >
> > > 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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