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Hi,
Instead of reading from here and there or reading any book, read the
original Pardo'd book. You will get the best of WFA. Most others are
poor copy.
Read the chapter on evaluating performance. Your concepts are not very
clear. There is nothing like optimizing OR WFA. It is optimizing on IS
data and then using WFA on OOS data. Then check out WF Efficiency.
You can also visit the Ami userkb and check out the Intelligent
Optimizer by Fred. He has given very detailed explanations.
BTW if you want to read specifics about Ami, then do read Howard
Bandy's book. I hope that he would be updating his book soon now that
WFA is available in Ami.
All the best
AV
--- In amibroker@xxxxxxxxxxxxxxx, "Louis Préfontaine" <rockprog80@xxx>
wrote:
>
> Hi,
>
> I've read somewhere that optimizing (or walk-forwarding) using
measures as
> k-ratio, RRR or max drawdown can lead to curve-fitting and is not a good
> strategy. Do you agree?
>
> What do you think is the best optimizing strategy?
>
> Thanks,
>
> Louis
>
> 2008/4/13, gerryjoz <geraldj@xxx>:
> >
> > Grant,
> > in your post you asked me to elaborate on why i thought the K-ratio
> > was a waste of space and RRR was simpler/better. What i have found is
> > that k-ratio is generally lower the higher the exposure for the same
> > or similar trading systems in back test. If you want a high k-ratio,
> > according to the AB calc, don't buy or sell!
> > Here is a contrived (curve-fit) example (run on real data) over a few
> > years
> > CAR 33%
> > Profit factor 7
> > CAR/MDD 2.8
> > Max Sys DD % 11.5%
> > RRR 2.15
> > K-ratio .096
> > exposure 49%
> > #trades 170
> >
> > the K-ratio definitio in AB help is
> > "
> > K-Ratio - Detects inconsistency in returns. Should be 1.0 or more. The
> > higher K ratio is the more consistent return you may expect from the
> > system. Linear regression slope of equity line multiplied by square
> > root of sum of squared deviations of bar number divided by standard
> > error of equity line multiplied by square root of number of bars. More
> > information: Stocks & Commodities V14:3 (115-118): Measuring System
> > Performance by Lars N. Kestner
> > "
> > personally i prefer measures which are more easily comprehended. This
> > one isn't, even tho 40 years ago i did do maths & stats at uni.
> > In any case, back in May 2004 Tomasz changed the calc...
> > ======>
> >
> > K-ratio calculation changed. following the change made by its creator,
> > Mr. Lars Kestner.
> >
> > Quoting from the book "Quantitative Trading Strategies" from 2003 by
> > Lars Kestner:
> >
> > [ - - - ]
> > " The K-ratio is a unitless measure of performance that can be
> > compared across markets and time periods. [ - - - ] Traders should
> > search for strategies yielding K-ratios greater than +0.50. Together,
> > the Sharpe ratio and K-ratio are the most important
> > measures when evaluating trading strategy performance. Note: When I
> > created the K-ratio in 1996, I thought I had created a
> > robust measure to evaluate performance. In mid-2000, trader Bob Fuchs
> > brought a small error to my attention regarding the
> > scaling of the K-ratio. He was correct in his critique and I have
> > corrected the error in this text. Publications prior to 2002 will
> > show a different formula for the K-ratio. The updated formula in this
> > book is correct."
> >
> > Mr Lars Kestner has corrected his formula based on this critique:
> > K-ratio = slope / ( sterr * per )
> >
> > slope: Linear regression slope of equity line
> > sterr: Standard error of slope
> > per: Number of periods in the performance test
> >
> > Special thanks to Jeremy Berkovits who brought that to my attention.
> >
> > <======
> > There was quite a bit of discussion at the time.
> > I understand RRR intuitively, and when i look at the other ratios i
> > can see why one is higher or lower (with a bit of checking).
> >
> > Is it possible that there was a typo in the K-ratio correction?
> > Perhaps Mr Kestner has made another change?
> > I don't have his books or articles, i just gave up on the k-ratio
> > because i didn't think it was telling me anything useful.
> >
> > I would be interested if you or anyone else have run some examples
> > where K-ratio is high and exposure is high, and what are the other
> > backtest numbers.
> >
> > regards
> > Gerry
> >
> >
> >
>
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