|
PureBytes Links
Trading Reference Links
|
I agree, there are plenty of other forums to post it to, AB-TS or even
elitetraders. and probably get more thorough examination there. I think the
concept presented needs thorough examination and is nowhere near ready for
"Training" as the originator espoused.
This is not the right place as Fred has said.
_____
From: amibroker@xxxxxxxxxxxxxxx [mailto:amibroker@xxxxxxxxxxxxxxx] On Behalf
Of Fred
Sent: Friday, 10 November 2006 12:12 PM
To: amibroker@xxxxxxxxxxxxxxx
Subject: [amibroker] Re: Margin of Error
What's the big deal ... Post it in AB-TS where those who aren't
interested don't have to read it ... The main forum is where for the
most part newbies come to learn about how to make things happen using
the product and not so newbies come to discuss new features and a
variety of other things realted to the product, as opposed to hearing
newbies spout off about concepts they can't quite put together that
have nothing to do with the product or its use.
I'd be happy to participate unless of course you think differing
points of view are for some reason dangerous.
--- In amibroker@xxxxxxxxx <mailto:amibroker%40yahoogroups.com> ps.com,
Keith McCombs <kmccombs@xxx> wrote:
>
> BrianB2 --
> I, for one, am very disappointed by your decision to discontinue
> "Project Based Training". I was looking forward to further
> installments. Trading is definitely a statistical endeavor, your
first
> submission on Margin of Error was, in my opinion, extremely well
written
> and "ON Topic".
>
> As for your apology, I will not accept it. It is not due. Nor do
I
> want an apology from those on the forum who were so rude to you and
to
> the forum as a whole. I just wish they had acted in a more civil
manner
> and allowed you to continue with your presentation. Their comments
were
> rarely constructive (except perhaps to their own egos). If, for
some
> ideological reason, they didn't agree with you, couldn't they just
have
> skipped your posts, with no harm done?
>
> Perhaps, after a few days, you can reconsider. Please, if
possible, try
> to block out the noise and continue on with your presentation.
>
> I am sure that there are others like myself who would love to
hear "the
> rest of the story".
> -- Keith
>
>
> brian.z123 wrote:
> >
> > This topic was part of OT:Project Based Training which actually is
> > not an OT subject.
> > I put it under OT to be extra polite.
> > It was all part of a project that involved demonstrating the
> > principles under discussion in AmiBroker at the end of the
> > discussion.
> >
> > The topic(s) are within both the guidelines for the forum and OT
> > subjects in the forum.
> >
> > Main topics of discussion:
> > - Trading techniques (using AmiBroker to implement the technique)
> >
> > Allowable off-topic discussion:
> > - Trading in general
> >
> > The project had no more to do with TS than it does, say, AT.
> > It had everything to do with trading in general.
> >
> > However I am removing it from the forum on two counts.
> > Firstly, I am customer orientated and I am responding to the
> > requests of forum members.
> > I don't agree with your arguments in anyway but I am complying
with
> > your request.
> >
> > Secondly, and more importantly, some members of the forum have
> > breached my personal code of conduct.
> > The environment (of this project) has been made unpleasant for me
> > and is not conducive to any further effort.
> >
> > That doesn't rule out my participation in other topics.
> >
> > Thanks to the people who contributed.
> > I apologise to anyone who was benefitting from the discussion and
> > who will now miss out on the rest of the *project* components.
> >
> > The decision was out of my hands.
> >
> > BrianB2.
> >
> > --- In amibroker@xxxxxxxxx <mailto:amibroker%40yahoogroups.com> ps.com
<mailto:amibroker%
40yahoogroups.com>,
> > "brian.z123" <brian.z123@>
> > wrote:
> > >
> > > Part1 of Project Based Training No1.
> > >
> > > The objective of the project is to introduce new traders to the
> > main
> > > concepts of system design/testing and demonstrate their
> > application
> > > in AmiBroker.
> > > At the same time it is hoped that the ideas presented will
provoke
> > > discussion and provide trading stimulation.
> > >
> > > All of the stages in the design process will not be demonstrated
> > as
> > > most have already been covered elsewhere in the AmiBroker
support
> > > material.
> > >
> > > A basic understanding of the application of some statistical
> > methods
> > > to the trading environment is a pre-requisite.
> > > The opening topics address this need.
> > >
> > > To those who find the subject matter new *the project* will be a
> > > workbook .
> > > To those who have experience in the subject it will be an
> > > opportunity to workshop.
> > >
> > > I would like to acknowledge my indebtedness to the academic
> > > community .
> > > I often refer to the material so generously interpreted for the
> > > layperson and made available at websites by academic
specialists,
> > > particularly those associated with Universities.
> > >
> > >
*******************************************************************
> > > Margin of Error.
> > >
> > > Back-testing of historical data provides traders with a sample,
> > > typical of the trade they are testing. From that sample they
make
> > > inferences about the larger group, or population, of all past
> > trades
> > > and future trades, of the same type, that were not included in
> > their
> > > test window.
> > > Despite the fact that the people who teach them to back-test
also
> > > teach them that the past can not predict the future, some
continue
> > > to act as if it can.
> > >
> > > If the past can't predict the future. How can anyone trade with
> > > confidence?
> > >
> > > The answer is that while the future can't be predicted, the
> > > likelihood of some mathematically defined outcomes can be
> > predicted
> > > with a degree of confidence.
> > > Statistics is the mathematical discipline that manages that very
> > > well.
> > >
> > > The caveat is that to apply statistical methods to trading
> > samples,
> > > the assumption is made that they are the result of a random
> > process.
> > > Where the trading system chosen is biased to non-random
behaviour
> > it
> > > will be prone to failure if the market acts contrary to that
bias.
> > >
> > > For that reason system traders are faced with a choice between
> > > attempting to define market behaviour e.g. a trend, and pick a
> > > system to suit that, or search for a universal signal that is
> > > consistent irrespective of any assumed market bias.
> > >
> > > If statistics can predict the likelihood of future trading
> > outcomes,
> > > how accurate will it be?
> > >
> > > *Standard error* or *margin of error* offers traders a solution
> > but
> > > they are not subjects that are often discussed.
> > >
> > > In his book ,*Design, Testing, and Optimisation of Trading
> > Systems*
> > > (John Wiley & Sons, 1992), Robert Pardo raises the issue of the
> > > accuracy of trading *predictions* based on the size of the
sample
> > > used:
> > >
> > > * The sample size must be large enough to allow the trading
system
> > > to generate a statistically significant sample of trades.
> > > A sample of one trade is certainly insignificant, whereas a
sample
> > > of 50 trades or more is generally adequate.*
> > >
> > > He uses Standard Error as a measure of significance:
> > >
> > > StdError = = 1/SquareRoot(sample size),
> > >
> > > 1/SqRt(50) = = 14.1%.
> > >
> > > There is little by way of further explanation provided.
> > >
> > > Applying the formula to a greater number of samples:
> > >
> > > Where N = = the number of trades in the sample
> > >
> > > StdError factor = = 1/SqRt(N)
> > > StdError% = 1/SqRt(N) * 100
> > >
> > > If N = = 2500 the StdError% = = 1/SqRt(2500) * 100 = = +/- 2%
> > > If N = = 10000 the StdError% = = 1/SqRt(10000) * 100 = = +/- 1%
> > >
> > > A trade sample of 10000 to provide statistical accuracy of 1% is
> > not
> > > easily achievable for traders, although a lot easier than
> > accurately
> > > surveying the eye colour of Polar Bears.
> > >
> > > Pardos equation is in fact, a rounding of the StdError equation
> > for
> > > a 95% level of confidence:
> > >
> > > Margin of error at 99% confidence = = 1.29/SqRt(N)
> > > Margin of error at 95% confidence = = 0.98/SqRt(N)
> > > Margin of error at 90% confidence = = 0.82/SqRt(N)
> > >
> > > Later in the project I will use a basic random number generator,
> > > within Xcel, to provide a visual aid that traders can use to
> > > understand the *sample* concept and decide for themselves what
> > > constitutes an adequate sample.
> > >
> > > Wikipedia provides some additional clarity on the subject:
> > >
> > > http://en.wikipedia <http://en.wikipedia.org/wiki/Margin_of_error>
.org/wiki/Margin_of_error
> > <http://en.wikipedia <http://en.wikipedia.org/wiki/Margin_of_error>
.org/wiki/Margin_of_error>
> > >
> > > *The margin of error expresses the amount of the random
variation
> > > underlying a survey's results. This can be thought of as a
measure
> > > of the variation one would see in reported percentages if the
same
> > > poll were taken multiple times. The larger the margin of error,
> > the
> > > less confidence one has that the poll's reported percentages are
> > > close to the "true" percentages, that is the percentages in the
> > > whole population.*
> > >
> > > *An interesting mathematical fact is that the margin of error
> > > depends only on the sample size and not on the population size,
> > > provided that the population is significantly larger than the
> > sample
> > > size, and provided a simple random sample is used. Thus for
> > > instance.......the running example with 1,013 random
samples......would
> > > yield essentially the same margin of error (4% with a 99% level
of
> > > confidence) regardless of whether the
population..........consisted of
> > > 100,000 or 100,000,000.*
> > >
> > > In short the tail of the trading system sample is swinging the
> > > trading system cat.
> > >
> > > BrianB2
> > >
> > > The material contained in this topic is for educational and
> > > discussion use only.
> > > It is not intended as financial advice and should not be
construed
> > > as such.
> > > The author is not an accredited academic or financial advisor.
> > >
> >
> >
>
Content-Description: "AVG certification"
No virus found in this incoming message.
Checked by AVG Free Edition.
Version: 7.1.409 / Virus Database: 268.14.11/542 - Release Date: 11/20/2006
|