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Apologies to the forum.
Obviously the duplicate did not emanate from my actions.
BrianB2.
--- In amibroker@xxxxxxxxxxxxxxx, "brian.z123" <dennisgdaniels@xxx>
wrote:
>
> Howard,
>
> Thanks for your post.
> I value the opportunity to talk to quality people on a quality
topic.
>
> In laymans terms; does the servitude to the objective function
> require compromising the multiple sub-objectives?
> If so who makes that decision; when, where and how is it made?
> According to the Calresco site, these decisions are made by the
> *programmer* on a subjective basis.
>
> If there are 3 or more sub-objectives with, with 2 or 3 metrics for
> each and, say a range of 20 for each of the metrics parameters ,
> doesn't the range of possible compromises become somewhat wide?
>
> If we could extract the metrics for each of those multiple paths on
a
> point by point basis, I wonder if, with hindsight, *we* might like
to
> change our prior subjective choices.
>
> Re walk OOS/walk-forward.
>
> A money game derived from the toss of a fair coin with +1 and -1
> win/loss values assigned to each side of the coin is played by 1000
> people.
> They are not aware of the nature of the game, only their individual
> outcomes i.e. their equity curves or trade value time series as
they
> unfold.
>
> An observer, who is a mathematician, knows the game is break-even
and
> also all of the metrics for the game in advance, but the players
> don't.
>
> At the end of 1000 plays, in all probability, not one single player
> will have exactly broken even.
> Approx 60% of players will have a small win or loss record, while
on
> the other end of the scale < 5% of players will have either an
> extreme win or extreme loss outcome.
> In all probability not one single equity curve will be exactly the
> same as any other.
>
> If one of the extreme winners happened to be a mathematician and
> decided to calculate his/her future in the game, would muliple
valued
> objective analysis, arrive at any conclusion other than that it is
a
> rosy one?
> By any measure, would the extreme winners not be justified in the
> belief that their future in the game is rosy?
>
> To the observer the 1000 equity curves, when expressed as a
> probability, represent a good approximation of all possible future
> outcomes of playing the game, for that exact number of plays.
> This is true to the basic tenents of maths, which state that the
> future can only be described in terms of probability.
>
> If all of the equity outcomes are written on a marble, placed in a
> basket, and drawn at random, this test would represent a true model
> of a blind or walk forward test.
>
> For a trader, who has backtested, the basket also represents
> historical results.
>
> Go ahead and draw your 2 marbles; one for your in sample (IS)
equity
> curve and one for your out of sample (OOS) equity curve.
>
> What is the chance that your first outcome will truely represent
your
> future in the game?
>
> What is the chance that your second equity curve will truely
> represent your future in the game?
>
> What is the chance that your first equity curve will be within
coeee
> of (Aussie slang for close to) the first?
> Should we define close as 50%, as Mr Pardo does?
> Why not 49 or 51?
>
> Does the first marble tell you (more/less/the same) about your
future
> in the game, compared to the second?
>
> What are the chances that your first and second marbles will both
be
> *good* ones?
> Is that a better or worse *sign* than drawing one *good* one
followed
> by one *bad* one?
>
> BrianB2 *:-)
>
> --- In amibroker@xxxxxxxxx <mailto:amibroker%40yahoogroups.com>
ps.com,
> "Howard B" <howardbandy@> wrote:
> >
> > Greetings --
> >
> > I'd like to add a comment on multivalued objective functions,
> particularly
> > as they relate to Monte Carlo analysis and walk-forward testing.
> >
> > As your trading system development moves to the stage of having a
> > walk-forward process performed automatically, it needs to be
guided
> by an
> > objective function that incorporates all of the features that are
> important
> > to you and can be expressed as a single scalar value.
> >
> > As you know, the walk-forward process divides the entire time
> series being
> > used into a sequence of in-sample periods, each followed by an
out-
> of-sample
> > period. A search procedure picks the single Best set of values
> for the
> > trading system's optimizable variables for a given in-sample
> period, then
> > records the results of using those values to simulate trading
over
> the
> > out-of-sample period. Then it slides the starting dates for both
> the
> > in-sample period and out-of-sample period forward, usually by the
> length of
> > the out-of-sample period, and does the search over again. This
> process
> > continues until all of the data has been processed. The results
> from the
> > out-of-sample periods are concatenated together and are used to
> decide
> > whether the trading system is a good one or not.
> >
> > The key point here is this: the search procedure must make its
> decision on
> > which set of variables is Best based on a single value -- the
value
> of the
> > objective function. By the time the development reaches this
> stage, we, as
> > system developers or programmers, will not have an opportunity to
> look down
> > the list of alternative trading systems to see if we would have
> picked one
> > other than the one at the top of the list. So, as we are working
> with
> > multivalued objective functions, we must incorporate them into a
> > single-valued objective function that fits our trading
requirements
> or
> > personality and that we trust to sort the alternatives into the
> order we
> > prefer.
> >
> > AmiBroker has the capability to creating custom objective
> functions. There
> > is an extensive discussion in my book about objective functions.
> The
> > discussion includes an example of using AmiBroker's custom
> backtester to
> > create a single-valued objective function by starting with a
central
> > objective function, then applying penalties (which can be
positive
> or
> > negative) to it to take secondary goals into account.
> >
> > In fact, I think that objective functions are so important that
> selection of
> > the objective function should be the First step in trading system
> design.
> > If the objective function fits the trader, most of the problems
> related to
> > the difficulty of following a trading system and of the
psychology
> of
> > trading disappear.
> >
> > Thanks for listening,
> > Howard
> > www.quantitativetradingsystems.com
> >
> >
> >
> >
> >
> >
> > On 17 Mar 2007 03:06:02 -0700, thomasdrewyallop <drewyallop@>
> wrote:
> > >
> > > Hello all,
> > >
> > > I have been working on the MCP technique described in Aronson's
> book
> > > for some time now. I have just completed conversion of the C++
> code on
> > > the web site to C# plus some associated utlities to massage AB
> data
> > > into the required format yet. No test yet; I will update under
> this
> > > thread.
> > >
> > > A few words on the theoretical underpinnings. There has been new
> > > information since the book was published and the code written. I
> > > believe an update is in the works. Also you need to be cautious
> when
> > > running MCP on IS data. This is only valid under certain
> conditions.
> > > Otherwise you must run OOS. I had an email from Aronson
> explaining all
> > > this but can't find it. You might want to contact David
directly -
> a
> > > good guy and willing to talk with readers.
> > >
> > > Finally, I would not reject walk forward. A very useful
technique
> > > despite Aronson's reservations. Well integrated with AB too via
> Fred
> > > Tonetti's IO add-in.
> > >
> > > Best regards,
> > >
> > > Drew Yallop
> > >
> > > p.s. just remebered that there is discussion on MCP as a
possible
> > > future addition to AB. Look in the AB suggestions section of
the
> web site.
> > >
> > >
> > >
> >
>
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