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Fred,
In my testing its commonplace to find setups that work very well up
to year 2000, then completely fall apart. It's almost a routine
now. If a 10 year test returns encouraging results, I then test year
by year. If the first years start out gangbusters I know exactly
what that means: the most recent years are killers.
Wayne
--- In amibroker@xxxxxxxxxxxxxxx, "Fred" <ftonetti@xxxx> wrote:
>
> It's too bad this study apparently ended in 2000 as it would have
> been interesting to see the results since then forward as well.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "seneca_kw" <seneca_kw@xxxx>
wrote:
> >
> > Duke,
> >
> > Thanks for the interesting link. I hadn't seen that study
> before.
> > It shows that a combination of TA and FA can be successful, but
it
> > doesn't quite answer the question that I had in mind.
> >
> > Take the example of a simple reversion-to-the-mean system: buy
> when a
> > stock closes below the lower Bollinger Band and exit N days
> later.
> > Does adding a fundamentals screen help? To test this, I'd divide
> > stocks into at least five categories, from the lowest-rated
> > fundamentals to the highest. Then I'd test each category using
> the
> > same system paramenters. Ideally, the results should be worst
for
> > the lowest-rated fundamentals, and should improve uniformly and
> > consistently up to the highest-rated. That would show that using
> > fundamentals adds value.
> >
> > But even if using fundamentals increases the profit per trade, it
> > doesn't necessarily follow that you'd want to incorporate them
> into
> > your system. They may decrease the number of signals to the
point
> > that your overall profits are lower even though your per-trade
> profit
> > is higher. In the example system, I know that I can improve per-
> > trade profits by tightening the requirements (eg stock must close
> at
> > 90% of lower BB). Maybe I'm better off chucking the fundamentals
> > screen, tightening the BB requirements, and screening the whole
> > market (which is what I think the original poster was asking).
> > These are the kinds of questions that I'm interested in
> investigating.
> > Wayne
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "duke.jones" <Duke.Jones@xxxx>
> > wrote:
> > > Wayne,
> > >
> > > Here is a PDF from Charlie Kirkpatrick which discusses a real
> time
> > portfolio using just three elements. Two of which are fundamental
> the
> > third price momentum.
> http://www.mta.org/awards/01/2001DowAwardb.pdf
> > >
> > > I believe fundamentals can be used to increase the probability
> of
> > success (based on testing and results) but the key is how you
> measure
> > success. Kirkpatrick's strategy has continued to perform well and
> has
> > consistently beaten the market but you had better be able to
> stomach
> > the large drawdowns. I have a enclosed pic of real time
> performance
> > since the beginning of last year of the Kirkpatrick (kirk.gif)
> model.
> > As you can see relative performance is great but its a model that
> > needs a trending market. Also enclosed is a backtest of a
> modified
> > version (valuemo.gif) with more history. Better equity curve and
> > roughly half the risk of the market but still large drawdowns.
> > >
> > > Where I have found value is using a combination of systems with
> > little multicollinearity. I would to love tell you its made me
> rich
> > beyond my wildest dreams and that I only post here for the
> > intellectual curiosity however, the reality is like all systems
> mine
> > is a work in progress. The good news is that in aggreagte they do
> > have an equity curve I can live with and actually trade. Since my
> > primary job is to provide research I also like the fact that you
> > don't hear about too many fund/tech systems so perhaps where
there
> is
> > no crowd there is more opportunity.
> > >
> > > OK, I have beaten the horse dead..time to climb back into the
> > shadows.
> > >
> > >
> > > Duke Jones, CMT
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