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Owen:
Of course, you are correct. I misstated the situation. In the backtest
of any mechanical system that actually trades on the next day's open
from today's signal, if the signal depends on TODAY'S cross of x over y,
and if you set your delays to 0, then AB will buy at TODAY'S open
(rather than tomorrow's) even though the cross may have occurred several
hours later than the open. So, you will always be buying after the fact
at a lower price, which cannot occur in real life.
AV
Owen Davies wrote:
> Among other useful comments, Al Venosa wrote:
>
> >Setting trade delays to 0 means that the buy
> >occurs on the same day the signal is generated, and in real life you'll
> >never know whether to buy until you download the data at the end of the
> >day in order to see if the cross occurred.
> >
> I hear this so often, but I really have problems with it. We live in a
> world where real time data is not all that hard to find or pay for. Five
> minutes before the close, I usually have a pretty good idea where the
> close will occur. For most sytems, all the necessary parameters can be
> calculated "near enough" and a trade entered before the close. Some of
> the errors will be in your favor, too darn many not, but in the end a
> fantastically profitable system should still be acceptably profitable.
>
> For that matter, in a world of 24-hour electronic trading, the close
> does not mean quite what it used to. Just run your numbers, and enter
> after hours. But if you are not willing to do that, follow it in real
> time during the day session for a while to see how it works out.
>
> Or so it seems to me. I would welcome any thoughts.
>
> It may be worth noting that on a very generous S&P continuous contract
> this particular system made less than 20 points in just under five years.
>
> Owen Davies
>
>
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