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From: Phsst [mailto:phsst@xxxxxxxxx]
Sent: Saturday, January 17, 2004 11:40 PMTo:
amibroker@xxxxxxxxxxxxxxxSubject: [amibroker] Re: Price range
filtering
OK Chuck,1st... the web address of the Holy Grail site
please. (even though Ivaughly remember a Holy Grail forum, I looked in Yahoo
Groups and didnot see anything resembling a Trading Group called Holy
Grail). I'lldo a little research there before embarassing myself
further here. AndBTW... do you ever sleep?And regarding my system(s)
you mentioned... they are still oxymoron'sto me since they had such terrible
drawdowns in the early 90's only tosurvive and produce the 'eye-popping'
results they did after '98. I'mslow though, so I'll play with them awhile
longer before hollering'uncle'.And FWIW... I remember much of your
past posts about backtestingphilosophy, and happen to agree with
you.<let me ask you to tell me the price of a high-priced stock in
early2000? You may say something like $200.>Your point is
of course that in early 2000 there was a bubble thatonly a few of us
recognized... and that we used as a signal to takeour profits and exit the
market.Anyway... I'm through for the night (I can't do this 24 hrs a day
likeyou). Tomorrow...Phsst--- In
amibroker@xxxxxxxxxxxxxxx, Chuck Rademacher<chuck_rademacher@x>
wrote:> Phsst said:> > I've read this post more than once
and on more than one occasiondecided to ignore it since I have not had
anything to contribute toyour query.> > But I keep coming back
to it because it strikes me as a curiousity.> > Like you
indicated, in the past I've filtered based upon pricerange, (particularly on
Shorts), but I've not yet found a situationwhere it paid to filter on price.
And now that you have enlightned meabout split-adjusted prices of the past,
I've even stopped filtering> adjusted Short prices, preferring to use raw
data filters instead.> > If it doesn't compromise your fiduciary
responsibilities, could youelaborate on the significance of price filtering
in your backtestedtrading systems?> > > My
reply:> > Thanks for replying and for giving me another chance to
spell outwhat I'm trying to achieve. You should see the answers
to thisposting that I received at the Holy Grail site. Yikes!!>
> I have a system, not too unlike one that you and I
previouslydiscussed. Amongst all the other things that it is doing, it
isfiltering such that it is only interested in stocks between $3 and
$10.> > Why does it want stocks in this range? I have a few
theories, butthe important thing is that if I give it any other range, it
doesn'tdo as well.> > So, my question was "Does the system
want low-priced stocks or doesit want stocks very specifically in the $3 to
$10 range?".> > Can you see the subtle difference there? In
order to betterdemonstrate what I'm talking about, let me ask you to tell me
theprice of a high-priced stock in early 2000? You may say
somethinglike $200. If I ask you to tell me the price of a
high-priced stocklast week, you might say something like $80.
Why the difference? Because the whole market is priced differently today
than it was inearly 2000.> > So, back to my original
question. Does my system want to tradecheap stocks or stocks between
$3 and $10. As it turns out, thesystem performed better in early 2000
if I raise that range to $8 to$15. So, this would suggest to me that
the system wants to tradecheap stocks, adjusted dynamically to overall
market pricing.> > In case it hasn't come through in everything
that I've ever talkedabout, I want my systems to be presented with all
stocks in alltimeframes and I want my systems to make the necessary
adjustments sothat they will trade well under any conditions. >
> As you know, I adjust my volume/turnover filters according to
theaverage volume/turnover of the market over time. If I have a
pricerange filter, why shouldn't that be adjusted dynamically
too? If itshould be adjusted, how should it be
adjusted? I was asking forideas on how to make such an
adjustment.> > While waiting for replies, I tried over 80
different methods ofadjusting the price range. The best method so far
is to adjust itbased on the standard deviation from the average price.
I tested thison all active and de-listed stocks back to 1960.>
> By making this adjustment, the system in question has:> >
1. A smoother equity line.> 2. More consistent annual profit
(all years with similar returns).> 3. Higher CAR and lower
MaxDD.> > > Is it more curve fit or is it adjusting to
market dynamics? I thinkit is the later and I realise that there are
those who will think itis the former.> > The logic is staying
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