Re: [amibroker] Re: Another tough question..., AmiBroker Email List Archive

On Apr 11, 2008, at 1:23 PM, Louis Préfontaine wrote:

Are you serious Brian? You make 40% per annum with EOD data, AFTER optimization with thousands of tickers, and in different kind of markets (bull, bear, sideways)?

I know a lot of people who would be more than happy with a buy-at-market 20% each morning.

I'm sure I still have a lot to learn. However, I don't know how it is possible to make such impressing figures with EOD data...

Louis

2008/4/11, brian_z111 <brian_z111@xxxxxxxxx>:
I sent an answer using an incorrect login - it won't make the forum
but you should receive it as PM (I am not certain).

Just in case, here is a very short reprise:

You can't fly as well on one wing as two.

Learn everything there is to know about system trading.
Learn everything there is to know about picking good stocks (i.e.
choosing an underlying instrument to trade that going to move) .
Put them both together.

example - if you had picked YHOO 10 years ago and traded it EOD with
a hot system where would you be now?

Which one is more important - the system or the instrument?

Learn everything there is to know about MoneyManagement so you can
maximise the above winning edge.

Sorry, I can't post anymore on this topic though - I am deep into
another project.

brian_z

--- In amibroker@xxxxxxxxxxxxxxx, "Louis Préfontaine"
<rockprog80@xxx> wrote:
>
> Hi Brian,
>
> Obtaining 40% on one stock in particular years is not difficult. I
could
> choose other stocks and gain 100% per year. What is more difficult
is to
> get 40% after a good optimization and with thousands of stocks.
So far 20%
> is the max I got and only for one year.
>
> Louis
>
> 2008/4/10, brian_z111 <brian_z111@xxx>:
> >
> > You asked me if 30-40% PA is really possible in EOD trading.
> >
> > Enter that code to Formula Editor and run it as a backtest on
YHOO -
> > use Yahoo data and test from 1997 - 2006 inclusive then look at
the
> > backtest report - you will see that the return is ? PA%
> >
> > The code buys on the Monday open and sells on the Friday close.
> >
> > It's not a trading system - it is a trading lesson.
> >
> > Where you find yourself is normal for new traders.
> >
> > Everyone starts off with naive optimism.
> > Many continue on naively for as long as they trade, and get the
> > corresponding results.
> > Those who are making earnest enquiries into trading are eventually
> > confronted with some trading quandries - I could make a list of
them -
> > how you resolve the difficult dilemnas of trading determines how
> > successful you will be.
> >
> > You are confronting them early in the piece because you are lucky
> > enough to have received the help of the AB community.
> >
> > brian_z
> >
> > --- In amibroker@xxxxxxxxxxxxxxx <amibroker%
40yahoogroups.com>, "Louis
> > Préfontaine"
> > <rockprog80@> wrote:
> > >
> > > Sorry Brian, I don"t understand what you mean...
> > >
> > > Louis
> > >
> > > 2008/4/10, brian_z111 <brian_z111@>:
> > > >
> > > > Apologies.
> > > >
> > > > Better use the correct syntax.
> > > >
> > > > Buy = DayOfWeek() == 1;
> > > > Sell = DayOfWeek() == 5;
> > > >
> > > > BuyPrice = O;
> > > > SellPrice = C;
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx <amibroker%
40yahoogroups.com><amibroker%
> > 40yahoogroups.com>,
> > > > "brian_z111" <brian_z111@> wrote:
> > > > >
> > > > > Is 20% PA EOD good?
> > > > >
> > > > > Run this on YHOO using Yahoo data - I have a 97 to 2006
> > database.
> > > > >
> > > > > Buy = DayOfWeek() == 1;
> > > > > Sell = DayOfWeek() == 5;
> > > > >
> > > > > BuyPrice == O;
> > > > > SellPrice == C;
> > > > >
> > > > > What PA% do you get (it is the first stock I picked to try)?
> > > > >
> > > > > Should I backtest?
> > > > >
> > > > > It gets rid of all of my bad ideas (a Dennisism!)
> > > > >
> > > > > If I can trade now, without a computer and backtesting, it
is
> > only
> > > > > because of the thousands of hours of computer trading hours
I
> > have
> > > > > under the belt.
> > > > >
> > > > >
> > > > >
> > > > > You have to generalise before you can specialise.
> > > > >
> > > > > brian_z
> > > > >
> > > > >
> > > > >
> > > > >
> > > > > --- In amibroker@xxxxxxxxxxxxxxx <amibroker%
40yahoogroups.com><amibroker%

> > 40yahoogroups.com>,
> >
> > > > "louisprefontaine" <rockprog80@>
> > > > > wrote:
> > > > > >
> > > > > > Hi everyone,
> > > > > >
> > > > > > I am not at home right now, and it's really a pleasure to
read
> > > > you
> > > > > > while drinking this marvelous Côtes-du-Rhônes. I really
> > > > appreciate
> > > > > > all the ideas you shared with me (and the group).
> > > > > >
> > > > > > I must say that everyone seem to have different visions
of the
> > > > > > problem, with people focusing on walk-forward
optimizations,
> > > > others
> > > > > > on specific date backtesting and still others (someone who
> > > > > contacted
> > > > > > me in private) refuse to backtest and want to trade
directly
> > with
> > > > > > easy to follow rules.
> > > > > >
> > > > > > For what I have read (and I will re-read tomorrow, at
home), I
> > > > need
> > > > > > more data if I want to follow the « rule » of the 30
trades.
> > > > Right
> > > > > > now, my system is based on a major index and it issues
only
> > about
> > > > 3-
> > > > > > 5 signals a year (which, at a 20% portfolio ratio is 15
to 25
> > > > > > trades), so I would need between 6 to 10 years of data,
which
> > of
> > > > > > course is impossible to do because we all know the market
10
> > > > years
> > > > > > ago as nothing to do with what it is right now.
> > > > > >
> > > > > > On the other side, I could use minimal backtesting, but
then
> > the
> > > > > > data-mining bias would increase, considering that my
system
> > has
> > > > > only
> > > > > > a very limited of trades each year. Let's say that if I
use
> > only
> > > > > > one year back-testing (a bull market, a sideway market,
and a
> > > > bear
> > > > > > to sideway market), that would be about 3-5 trades. How
can I
> > > > say
> > > > > > with certitude that the gains are not due to luck on such
a
> > small
> > > > > > amount of signals on the major index? Even if I get 30
trades
> > > > from
> > > > > > buying the stocks linked to the index, this may still be
only
> > > > data-
> > > > > > mining to the major index, as the stocks tend to follow
that
> > > > > index.
> > > > > > (As an example, if I data-mine perfectly the Dow Jones,
> > chances
> > > > are
> > > > > > that buying the 30 companies in the index will give a good
> > > > > > result... I would have a lot more trades, but in fact they
> > would
> > > > > be
> > > > > > based only on the same data-mined Dow Jones index...) --
BIG
> > > > > PROBLEM-
> > > > > > -
> > > > > >
> > > > > > Finally, there is the suggestion of going intraday. I'd
like
> > to
> > > > do
> > > > > > this, butmy RT data provider only provides 1 year of
intraday
> > > > > data.
> > > > > > Do you know other provider who gives more?
> > > > > >
> > > > > > And finally finally... Are you sure Brian one can expect
40%
> > per
> > > > > > annumm on EOD data? This seem like very very good!
> > > > > >
> > > > > > My strategy right now is based on a very limited number of
> > trades
> > > > > > with extra-limited drawdowns (I need to thank a member of
this
> > > > > board
> > > > > > who helped me with this... You know who you are... Thanks
> > > > again!).
> > > > > > So I can put maximum margin and boost the results. But
with
> > > > extra-
> > > > > > little trades comes the problem of significance of the
> > results:
> > > > are
> > > > > > the results good because the system is good or are the
results
> > > > good
> > > > > > be cause of good luck?
> > > > > >
> > > > > > That was the purpose of the first message, and so far I
have
> > new
> > > > > > ideas but I am still wondering what I should do.
> > > > > >
> > > > > > Louis
> > > > > >
> > > > > >
> > > > > >
> > > > > > --- In amibroker@xxxxxxxxxxxxxxx <amibroker%
40yahoogroups.com><amibroker%

> > 40yahoogroups.com>,
> > > > "brian_z111" <brian_z111@>
> > > > > > wrote:
> > > > > > >
> > > > > > > > I agree that there is a serious problem when the only
data
> > > > that
> > > > > > is
> > > > > > > >available
> > > > > > > > contains no period that is similar to what is
expected in
> > the
> > > > > > > >future.
> > > > > > > >
> > > > > > >
> > > > > > > Getting enough data is an issue for EOD traders.
> > > > > > >
> > > > > > > A few possible solutions I have mentioned in the past (I
> > > > > > like 'live'
> > > > > > > work but the negative is that it doesn't persist -
unlike a
> > > > book).
> > > > > > >
> > > > > > > - new traders should work in old EOD data, say 1995-
2000,
> > until
> > > > > > they
> > > > > > > address all of the basic issues, like length of IS
versus OS
> > > > etc.
> > > > > > >
> > > > > > > They should save up the best years (the current 5) until
> > they
> > > > > > start
> > > > > > > to get good == backtests > 30-40% per annum on OOS
tests and
> > > > then
> > > > > > > move to fresh and/or bought data for
confirmation/trading.
> > > > > > >
> > > > > > > (of course we know that a lot of ideals will never make
it
> > to
> > > > > > common
> > > > > > > practice - some are just too hard to sell).
> > > > > > >
> > > > > > > - use other markets (that is why I highlighted the S&P
> > global
> > > > > 1200
> > > > > > in
> > > > > > > a UKB post) - a US trader could practice on the ASX top
20
> > for
> > > > > > > example - ASX market behaviour of the 20 most liquid
stocks
> > is
> > > > > > > similar to the US top 100 or 200.
> > > > > > >
> > > > > > > - become an intraday trader (plenty of data then)
> > > > > > >
> > > > > > > - take a ten year history that included different market
> > > > > > conditions,
> > > > > > > filter it for liquid stock (for concept testing I like
only
> > > > stock
> > > > > > > that trade everyday - no data holes - in real time I
know
> > when
> > > > a
> > > > > > > stock isn't trading) - sort the data by 10 year
performance
> > > > i.e.
> > > > > > 10
> > > > > > > year % return - assign them an ordinal number - then put
> > every
> > > > > > even
> > > > > > > stock in an IS testing watchlist and every odd stock in
an
> > OOS
> > > > > > > testing watchlist.
> > > > > > >
> > > > > > > Now you have a 10 year IS and OOS database with a range
of
> > > > > > conditions
> > > > > > > and equal numbers of bullish and bearish stock.
> > > > > > >
> > > > > > > I have done that with the most liquid stock in Jim's
Yahoo
> > > > > > database
> > > > > > > and I am comfortable working with it like that.
> > > > > > >
> > > > > > > > Artificial data has no value.
> > > > > > >
> > > > > > > One exception is for training.
> > > > > > >
> > > > > > > I have learnt a lot using (crude) randomly generated
data
> > as a
> > > > > > > training benchmark - I regard the Black Swan as my
> > adversary so
> > > > I
> > > > > > > have studied his/her habits in depth.
> > > > > > >
> > > > > > > The beauty of RGD is that, while it is not real, it is
> > > > > > lifelike,and
> > > > > > > more importantly, we know in advance what it's real
> > performance
> > > > > is
> > > > > > > (W/L ratio, %period returns).
> > > > > > >
> > > > > > > I can't recommend that type of synthetic trading highly
> > enough.
> > > > > > >
> > > > > > > In all other trading tests we never ever have certainty
> > about
> > > > > > those
> > > > > > > numbers - I love the certainty of simulated data for
> > comparing
> > > > > > real
> > > > > > > behaviour to theoretical behaviour (if they don't mactch
> > then I
> > > > > am
> > > > > > > not confident my theories will stand up in real life).
> > > > > > >
> > > > > > >
> > > > > > > brian_z
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > > --- In amibroker@xxxxxxxxxxxxxxx <amibroker%
40yahoogroups.com><amibroker%

> > 40yahoogroups.com>,
> > > > "Howard B" <howardbandy@>
> > > > wrote:
> > > > > > > >
> > > > > > > > Hi Louis --
> > > > > > > >
> > > > > > > > I agree that there is a serious problem when the only
data
> > > > that
> > > > > > is
> > > > > > > available
> > > > > > > > contains no period that is similar to what is
expected in
> > the
> > > > > > > future.
> > > > > > > >
> > > > > > > > Artificial data has no value.
> > > > > > > >
> > > > > > > > Using data that is earlier in time than the in-sample
> > period
> > > > > has
> > > > > > > limited
> > > > > > > > value. You can test earlier data, but you will over-
> > estimate
> > > > > the
> > > > > > > > performance that you can expect in the future.
> > > > > > > >
> > > > > > > > Are there other tickers that are closely related that
have
> > > > data
> > > > > > for
> > > > > > > the
> > > > > > > > periods you would like to test?
> > > > > > > >
> > > > > > > > In the end, you will need to make a decision on
whether to
> > > > > place
> > > > > > > actual
> > > > > > > > trades. And that decision must be based on your
> > > > understanding
> > > > > > of
> > > > > > > and
> > > > > > > > confidence in your system. The only way to gain that
> > > > > confidence
> > > > > > is
> > > > > > > by
> > > > > > > > observing the transitions from in-sample testing to
out-
> > of-
> > > > > > sample
> > > > > > > simulated
> > > > > > > > trading.
> > > > > > > >
> > > > > > > > Thanks,
> > > > > > > > Howard
> > > > > > > > On Tue, Apr 8, 2008 at 10:37 PM, Mike <sfclimbers@>
wrote:
> > > > > > > >
> > > > > > > > > Howard's comments are consistent with those of
Robert
> > > > Pardo
> > > > > > (The
> > > > > > > > > Evaluation and Optimization of Trading Strategies,
Wiley
> > > > > > 2008),
> > > > > > > with
> > > > > > > > > respect to training periods.
> > > > > > > > >
> > > > > > > > > Pardo recognizes that there is a tradeoff between
more
> > > > robust
> > > > > > > > > strategies which require longer in sample training
> > periods,
> > > > > > > require
> > > > > > > > > fewer reoptimizations, trade for longer out of
sample
> > > > periods
> > > > > > and
> > > > > > > are
> > > > > > > > > generally less profitable, vs. more responsive
> > strategies
> > > > > which
> > > > > > > > > require shorter in sample training periods, require
more
> > > > > > frequent
> > > > > > > > > reoptimizations, can only trade for shorter out of
> > sample
> > > > > > periods
> > > > > > > and
> > > > > > > > > are generally more profitable.
> > > > > > > > >
> > > > > > > > > Pardo suggests that strategies generating more
frequent
> > > > > > signals
> > > > > > > can
> > > > > > > > > use shorter in sample training windows since they
> > generate
> > > > the
> > > > > > > > > minimum 30+ trades sooner than strategies that
generate
> > > > less
> > > > > > > frequent
> > > > > > > > > signals. But, that in any case, one should try to
use
> > an in
> > > > > > sample
> > > > > > > > > period sufficiently long to capture bull, bear, and
> > > > sideways
> > > > > > > markets.
> > > > > > > > >
> > > > > > > > > Further, when first trying to evaluate the worth of
the
> > > > > > strategy,
> > > > > > > > > Pardo suggests backtesting the in sample history in
> > > > segments
> > > > > > > rather
> > > > > > > > > than one shot (e.g. 10 year history divided into
five 2
> > year
> > > > > > > > > segments). This gives you better insight as to
whether
> > the
> > > > > > results
> > > > > > > > > are due to a single segment or are consistent
accross
> > > > > > segments,
> > > > > > > and
> > > > > > > > > provides insight to your eventual in sample/out of
> > sample
> > > > > > periods
> > > > > > > for
> > > > > > > > > Walk Forward Optimization.
> > > > > > > > >
> > > > > > > > > Finally, Pardo suggests that regardless of whether a
> > long
> > > > or
> > > > > > short
> > > > > > > > > training period is used, a rule of thumb for in
sample
> > vs.
> > > > > out
> > > > > > of
> > > > > > > > > sample is for out of sample to be between 1/8 to
1/3 of
> > the
> > > > > in
> > > > > > > sample
> > > > > > > > > period (e.g. 24/8 = 3 and 24/3 = 8, so it would
> > be "safe"
> > > > to
> > > > > > trade
> > > > > > > > > out of sample for 3 - 8 months based on a system
> > backtested
> > > > > > over
> > > > > > > 24
> > > > > > > > > months.
> > > > > > > > >
> > > > > > > > > Yet another good book covering the topic. I
reccomend
> > it.
> > > > > > > > >
> > > > > > > > > Mike
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx<amibroker%
40yahoogroups.com><amibroker%
> > 40yahoogroups.com><amibroker%
> > > > > > > 40yahoogroups.com>, "Howard B"
> > > > > > > > > <howardbandy@> wrote:
> > > > > > > > > >
> > > > > > > > > > Hi Louis, and all --
> > > > > > > > > >
> > > > > > > > > > I know David Aronson, respect him, and like and
> > recommend
> > > > > > his
> > > > > > > book.
> > > > > > > > > >
> > > > > > > > > > My view is that the in-sample period should be as
> > short as
> > > > > > > > > practical. My
> > > > > > > > > > thought is that: the system we are testing /
trading
> > is
> > > > > > trying
> > > > > > > to
> > > > > > > > > recognize
> > > > > > > > > > the signal from among the noise; and the signal
> > patterns
> > > > are
> > > > > > > > > changing over
> > > > > > > > > > time. So the length of the in-sample period is a
> > > > tradeoff --
> > > > >
> > > > > > > short
> > > > > > > > > to be
> > > > > > > > > > able to change as the characteristics of the
> > underlying
> > > > > > market
> > > > > > > > > change, but
> > > > > > > > > > not so short that the system is over-fit to the
noise
> > > > > rather
> > > > > > > than
> > > > > > > > > learns the
> > > > > > > > > > signal.
> > > > > > > > > >
> > > > > > > > > > You can test this in AmiBroker. Have your system
> > ready to
> > > > > > buy
> > > > > > > and
> > > > > > > > > sell. In
> > > > > > > > > > the Automatic Analysis window, use Settings and
set up
> > > > the
> > > > > > Walk
> > > > > > > > > Forward
> > > > > > > > > > parameters. Try an in-sample period of 10 years,
an
> > out-
> > > > of-
> > > > > > > sample
> > > > > > > > > period of
> > > > > > > > > > 6 months or 1 year. Run Optimize > Walk Forward
and
> > look
> > > > at
> > > > > > the
> > > > > > > in-
> > > > > > > > > sample
> > > > > > > > > > and out-of-sample equity curves. Shorten the
length of
> > > > the
> > > > > > in-
> > > > > > > > > sample period
> > > > > > > > > > to 9, then 8, then 7, ... then 1 year, keeping the
> > out-of-
> > > > > > sample
> > > > > > > > > period
> > > > > > > > > > unchanged. Depending on your system and the
market it
> > is
> > > > > > > trading,
> > > > > > > > > you may
> > > > > > > > > > find that there is a sweet spot in the length of
the
> > in-
> > > > > > sample
> > > > > > > > > data. If so,
> > > > > > > > > > that is the amount of data that allows your
system to
> > > > > > recognize
> > > > > > > the
> > > > > > > > > signal
> > > > > > > > > > without being overwhelmed by the noise.
> > > > > > > > > >
> > > > > > > > > > Thanks,
> > > > > > > > > > Howard
> > > > > > > > > >
> > > > > > > > > >
> > > > > > > > > > On Tue, Apr 8, 2008 at 8:56 AM, Louis Préfontaine
> > > > > > <rockprog80@>
> > > > > > > > >
> > > > > > > > > > wrote:
> > > > > > > > > >
> > > > > > > > > > > Hi,
> > > > > > > > > > >
> > > > > > > > > > > I've been thinking a lot lately, and here is
> > something
> > > > I
> > > > > > would
> > > > > > > > > like to
> > > > > > > > > > > have your opinion on.
> > > > > > > > > > >
> > > > > > > > > > > I've been introduced to automated systems by a
trend
> > > > > > following
> > > > > > > > > book which
> > > > > > > > > > > related how some trend followers built their
> > systems in
> > > > > > the
> > > > > > > 70s
> > > > > > > > > or 80s and
> > > > > > > > > > > got rich with them, and how their system did not
> > really
> > > > > > change
> > > > > > > > > all this
> > > > > > > > > > > time. They didn't change their system because
they
> > say
> > > > the
> > > > > > > > > market does NOT
> > > > > > > > > > > change. They looked at historic market data
from the
> > > > > 1800s
> > > > > > and
> > > > > > > > > the market
> > > > > > > > > > > was as it is right now. So they say.
> > > > > > > > > > >
> > > > > > > > > > > On the other side, lately I have been
introduced to
> > the
> > > > > > > concept of
> > > > > > > > > > > ever-changing markets and have had a hard time
> > trying
> > > > to
> > > > > > > build my
> > > > > > > > > system.
> > > > > > > > > > > Got a very promising start with a system getting
> > around
> > > > > 15-
> > > > > > 20%
> > > > > > > > > average for
> > > > > > > > > > > April 2007 to April 2008 (with little drawdown,
> > which
> > > > > mean
> > > > > > > that
> > > > > > > > > with
> > > > > > > > > > > leverage I can boost this a lot). In any
variation
> > over
> > > > > > > > > thousands of stocks
> > > > > > > > > > > the results were nearly all positives. But
then, I
> > > > tested
> > > > > > that
> > > > > > > > > same system
> > > > > > > > > > > for the years 2000 to 2008, and that was
> > disappointing.
> > > > > > Even
> > > > > > > more
> > > > > > > > > > > disappointing from 2001 to 2003, another
troubled
> > > > market
> > > > > > like
> > > > > > > the
> > > > > > > > > one we are
> > > > > > > > > > > in right now.
> > > > > > > > > > >
> > > > > > > > > > > So here I am, wondering where to go from now.
> > Aronson's
> > > > > > > > > excellent book
> > > > > > > > > > > talk about the importance of having a very large
> > sample
> > > > > of
> > > > > > > data.
> > > > > > > > > But the
> > > > > > > > > > > problem is: the larger the data, the
> > more "historic" it
> > > > > > gets
> > > > > > > and
> > > > > > > > > the less it
> > > > > > > > > > > seems to work.
> > > > > > > > > > >
> > > > > > > > > > > Is my system not working, or did the markets
really
> > > > > > change?
> > > > > > > Do I
> > > > > > > > > need to
> > > > > > > > > > > make it more robust (that is, it MUST make
profit
> > even
> > > > > > from
> > > > > > > 2001
> > > > > > > > > to 2003),
> > > > > > > > > > > or can I have complete faith in what happened
in the
> > > > last
> > > > > > > year?
> > > > > > > > > > >
> > > > > > > > > > > All those questions... Would be nice to read
what
> > you
> > > > > think
> > > > > > > > > about this.
> > > > > > > > > > >
> > > > > > > > > > > Louis
> > > > > > > > > > >
> > > > > > > > > > >
> > > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > >
> > > > > > >
> > > > > >
> > > > >
> > > >
> > > >
> > > >
> > >
> >
> >
> >
>