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Re: [amibroker] Re: Monte Carlo analysis for trading systems



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Trading Reference Links

Hi Mavirk --

If I understand your question, you are asking where to find performance statistics based on actual trades.

The data for exchange traded funds is widely available.  For example, if you want to know about the S&P ETF that follows the energy sector, enter the phrase "sp xle etf performance" into a search.  You will get several links.  Here are several:
http://www.amex.com/etf/prodInf/EtPiOverview.jsp?Product_Symbol=XLE
http://www.sectorspdr.com/eqsnaps/?do=snapshot&symbol=XLE
http://www.google.com/finance?q=NYSE:XLE

The data for Commodity Trading Advisors is a little more difficult to find.  Many of the good sources require a subscription.  Here are several links that provide performance free results:
http://www.catranis.com/cta.htm
http://www.attaincapital.com/trading_system_rankings
http://www.managedfutures.com/top_cta_rankings.aspx

The data for hedge funds is more difficult to find, with most of the data requiring a subscription.

Other readers -- please add links and urls to this list.

Thanks,
Howard


On Wed, Feb 25, 2009 at 2:10 AM, MAVIRK <mvirk67@xxxxxxxxx> wrote:

The topic is very interesting and I would like to learn. Before I start learning I would like some help. Can somebody please guide me to a website/forum/community detailing trade performance, as opposed to the test performance, of individuals/organizations using Monte Carlo or other like modeling techniques.
Thanks.

From: richpach2
Sent: Wednesday, February 25, 2009 1:45 PM
Subject: [amibroker] Re: Monte Carlo analysis for trading systems

Howard and Brian,

I agree with Keith. You have not looked at "out-of-sample" interest in
this subject because of the people like Keith and me who are keen
followers and students but do not feel they can contribute at this
point in time. We are not part of the data sample which you can test.
So, I'd say at least in this case 'out-of-sample" results will be much
higher than "in-sample" results of current contributing participants.

Regards
Richard

--- In amibroker@xxxxxxxxxxxxxxx, Keith McCombs <kmccombs@xxx> wrote:
>
> Howard and Brian --
> Just because most of the posting on this subject has been limited to
the
> two of you, don't assume there is little interest. Some of us, such as
> myself, have been following the discussion closely. However, I for
one,
> do not feel qualified to comment on the subject.
>
> BTW, I have David Aronson's "Evidence-based Technical Analysis". I
read
> about half of it. For the most part, I found it to be understandable,
> but far too verbose. To me, he seems to be saying the same thing,
over,
> and over, and over, again.
>
> I'm looking forward to Howard's new book in October. In the mean time,
> could either of you suggest some references that are less verbose and
> more on the practical side than Aronson's tome.
>
> Thank you.
> -- Keith
>
> Howard B wrote:
> >
> > Hi Brian --
> >
> > You wrote:
> > "I am amazed at the low level of interest in the subject, by traders
> > in general, and also that 'we' haven't moved along very quickly,
> > since Pardo e.g. there's not a lot of quality books, on simulation
> > for trading, available."
> >
> > I agree that there has been a relatively low level of interest.
> >
> > I agree that when Bob Pardo's first book was published in 1992, it
was
> > the best available. Since then there are several books that discuss
> > trading systems development with varying degrees of understanding of
> > the issues involved in modeling and simulation of financial trading
> > systems.
> >
> > As examples:
> >
> > Perry Kaufman's "Trading Systems and Methods", 1992, followed by "New
> > Trading Systems and Methods" in 2005.
> > Van Tharp's "Trade Your Way to Financial Freedom", 1998, and its
> > Second Edition, 2007.
> >
> > There is a fair amount of literature that discusses ARCH, GARCH,
> > ARIMA, and related models. But those are mathematically
> > sophisticated, difficult to implement, and do not apply well to short
> > term systems.
> >
> > David Aronson's "Evidence-based Technical Analysis", 2007, is
> > excellent and does recognize the need for out-of-sample testing and
> > describes the walk-forward process.
> >
> > But, modesty aside, my own "Quantitative Trading Systems", 2007, is
> > unique in identifying the key issues involved in designing trading
> > systems, with the desire that they will be profitable when traded.
It
> > goes on to describe the combination of custom objective function,
> > out-of-sample testing, and automated walk-forward testing which,
in my
> > opinion, is the only way to estimate what the results of actually
> > trading the system are likely to be. And, it includes practical
> > examples illustrating how to design, test, and validate trading
> > systems using methods that are reasonably rigorous. The tutorial and
> > reference, "Introduction to AmiBroker", 2008, works through a series
> > of exercises illustrating the features of AmiBroker; beginning with
> > installation and displaying the first chart and progressing through
> > automated walk-forward testing. The sequel, "Advanced AmiBroker", to
> > be published about October 2009, will discuss and give AmiBroker code
> > for the practical analysis of portfolios, risk, and position
sizing --
> > all important features of realistic trading and trading management.
> >
> > Why is there so little apparent interest? Some possible reasons:
> > 1. Until AmiBroker, there has not been a retail-level trading system
> > development platform that provided the capabilities needed.
> > Specifically, the abilities to define an objective function and
> > perform automated walk-forward testing, and to work with
portfolios as
> > well as with individual issues.
> > 2. University courses in modeling and simulation that cover
> > non-stationary time series with a focus on trading systems are rare
> > (non-existant?).
> > 3. As soon as any attempt is made to be rigorous in modeling and
> > validation technique, the mathematics involved put many people off.
> > 4. The popular press seems content with suggesting that backtesting
> > is an adequate validation technique. Since all backtesting results
> > look good when backtesting is finished, it is easy to be disappointed
> > and discouraged when out-of-sample testing shows poorer results.
> > 5. Coupling the fact that the rewards for developing profitable
> > trading systems are so great with the fact that increased use of a
> > profitable system reduces the profitability for everyone using it,
> > people who have discovered good techniques tend to be reluctant to
> > share them.
> > 6. There has been a lack of accessable educational material
> > describing how a person might go about learning the techniques needed
> > to be successful.
> >
> > Thanks for listening,
> > Howard
> > www.blueowlpress.com <http://www.blueowlpress.com>
> >
> >
> > On Mon, Feb 16, 2009 at 6:14 PM, brian_z111 <brian_z111@xxx
> > <mailto:brian_z111@...>> wrote:
> >
> > > I know both David Aronson and Tim Masters. I like and recommend
> > >David's
> > > book, "Evidence-based Technical Analysis".
> >
> > I find that DA and TM's public work is the most challenging,
and up
> > to date material on system evaluation, going around i.e. for the
> > general trading community (don't know what is happening in
academia).
> >
> > I am benchmarking my ideas against theirs.
> >
> > I was giving Tims paper a careful re-reading yesterday and went to
> > sleep (very quickly) with EBTA in my hand (no reflection on
the book).
> >
> > I don't think I will be going head to head with them any time
soon,
> > for obvious reasons, but I will be noting my concerns, about
MCP as a
> > tool for system evaluation, at the Zboard.
> >
> > Naturally I will only do that in a naive way and won't be
exhibiting
> > the mathematical rigor, and testing, that TM does in his paper
> > (others are welcome to do that, if they are interested, or
refute my
> > arguments in writing anywhere they like ... I will upload any
quality
> > posts mailed to me).
> >
> > I am amazed at the low level of interest in the subject, by
traders
> > in general, and also that 'we' haven't moved along very quickly,
> > since Pardo e.g. there's not a lot of quality books, on simulation
> > for trading, available.
> >
> > (Haven't read the Scherer and Martin book, recommended by Patrick
> > yet).
> >
> > Please let me know of any other hardcore authors worth
referencing.
> >
> >
> > > Tim's paper on
> > > Monte Carlo makes some assumptions that I think are
inappropriate
> > >for use
> > > when analyzing financial trading systems.
> >
> > I am grateful that he made the effort and 'published' it.
> > It is the only definitive method I have found.
> >
> > I also have some concerns about the method, albeit basic ones:
> >
> > - it involves so many exceptions, to the extent that it is almost
> > impractical for general trading applications (admittedly TM has
> > provided a template that we can adjust to suit our own
cirumstances)
> >
> > - so far I am sceptical, about the possibility of mathematically
> > detecting survivor bias in optimization runs etc.
> >
> > Note that I don't claim 100% understanding of MCP, or Whites
Reality
> > Check, at this stage .... the fact that the MCP algorithm is
written
> > in a foreign language doesn't make it easy for me (I haven't
looked
> > at the C# version in our file section yet).
> >
> >
> > > Two, I feel that Monte Carlo analysis is of limited
> > > value when the trading system is completely deterministic.
> >
> > I am not sure what you mean by 'deterministic' with regard to MCP.
> >
> > Can you elaborate?
> >
> > Re BiSim:
> >
> > I feel it has some advantages over MCP and bootstrapping, at
least as
> > an eductational tool and possibly in some limited trading
> > applications..... one of the advantages is that it is a
convergence
> > simulation (it approaches the mean outcome quickly and without
> > massive effort) ... another is that it is very comfortable with
> > correlation (in fact I think other 'modellers' make hard work
out of
> > handling it).
> >
> > I hope to explore topics like that at the board.... obviously
> > developing rigorous signinficance tests is going to be a
challenge,
> > if I get that far.
> >
> > As I said, I am working live (I am not sure where it is
going!), so
> > if my future 'research' shoots down my own theories so be it.
> >
> > Thanks for the feedback.
> >
> > brian+z
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com>, Howard B <howardbandy@>
> > wrote:
> > >
> > > Hi Brian --
> > >
> > > I know both David Aronson and Tim Masters. I like and recommend
> > David's
> > > book, "Evidence-based Technical Analysis". Readers of both
David's
> > work and
> > > mine will find that David is even more conservative than I am
> > regarding
> > > interpretation of in-sample versus out-of-sample results. Tim's
> > paper on
> > > Monte Carlo makes some assumptions that I think are
inappropriate
> > for use
> > > when analyzing financial trading systems. Two points in
> > particular. One, I
> > > feel that neither bootstrapping nor jacknifing should be
used when
> > sampling
> > > financial time series. Two, I feel that Monte Carlo analysis
is of
> > limited
> > > value when the trading system is completely deterministic. I'll
> > bring those
> > > up when I next talk with Tim.
> > >
> > > Thanks,
> > > Howard
> > >
> > > On Thu, Feb 12, 2009 at 4:54 PM, brian_z111 <brian_z111@> wrote:
> > >
> > > > No rush.... I have been sitting on it for at least 2 years
now.
> > > >
> > > > The full BinomialSimulation story won't be finished for
months...
> > I
> > > > will only post about once a month.
> > > >
> > > > First I am going to track back to the beginning, for the
benefit
> > of
> > > > non-mathematicians.
> > > >
> > > > Also, I will upload some stress test files, OR post images
of the
> > key
> > > > graphs from those files, so interested parties don't need to
> > repeat
> > > > the massive simulations, for samples with bias and/or higher
> > > > dispersion, that I have already done.
> > > >
> > > > (Given your experience you would probably be best to sit
back and
> > > > wait until I post the BS maths _expression_ ... it will be
very easy
> > > > for you to test and critique my theory at that stage ...
you can
> > > > leave the hack work to me).
> > > >
> > > > Note that it is a work in progress i.e. I am working
'live', warts
> > > > and all, and I might not finish it, or leave it on the net, (I
> > like
> > > > the Buddhist idea of 'pointing to the way' and demonstrating
> > > > impermanence).
> > > >
> > > > I probably won't 'advertise' here, in this forum, but BS posts
> > will
> > > > go onto the Zboard blog page so they can get picked up by RSS.
> > > >
> > > > The other pages at the site, which are mainly just
resources etc,
> > > > won't be disseminated via RSS.
> > > >
> > > > FYI I think BS is a significant method compared to
bootstrapping
> > and
> > > > MonteCarlo (considering their pros and cons) e.g. I
disagree with
> > > > some of the assumptions of Timothy Masters, in his 2006 MCS
> > article
> > > > at Aronsons 'EvidenceBasedTechnicalAnalysisSite' site... I
also
> > found
> > > > TM indecisive at some key points along the way.
> > > >
> > > > However, I am not going to follow the academic method of
citing
> > > > others and criticising their work.
> > > >
> > > > I am very pleased you are looking at it.
> > > >
> > > > It has to stand up to the critique of informed mathematicians,
> > like
> > > > yourself (more so than other new ideas because I am a naive
> > > > mathematician and an intuitive rather than a trained
> > > > objectivist/academic).
> > > >
> > > > Around 20 people downloaded the file .... some of them
would be
> > just
> > > > curious, or 'getting an education' (which are good things in
> > > > themselves) .... so at best there are only a few hard core
> > analysts
> > > > considering my 'thesis'.
> > > >
> > > > Pity QT isn't still around ... he was a very nice guy and very
> > good
> > > > on this stuff ;-)
> > > >
> > > > The Zboard site does allow for collaboration.
> > > >
> > > > If one or two self-managing people came along who wanted
to add
> > > > something I could give them access ..... in that case the site
> > would
> > > > stay online for the benefit of future googling traders who
are in
> > > > search of trading truths.
> > > >
> > > > Cheers and thanks for your interest ... it's a compliment.
> > > >
> > > > brian.
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com> <amibroker%40yahoogroups.com
> > <http://40yahoogroups.com>>,
> > Howard B
> > > > <howardbandy@> wrote:
> > > > >
> > > > > Hi Brian --
> > > > >
> > > > > The zboard file worked fine.
> > > > >
> > > > > I have been snowed under with maintenance jobs the past
week, so
> > > > it'll take
> > > > > me a couple of days to look at it.
> > > > >
> > > > > Thanks,
> > > > > Howard
> > > > >
> > > > > On Tue, Feb 10, 2009 at 1:06 AM, brian_z111
<brian_z111@> wrote:
> > > > >
> > > > > > Howard,
> > > > > >
> > > > > > I might move to MediaFire completely .. they are free
> > > > and 'permanent'
> > > > > > but the ads are terrible.
> > > > > >
> > > > > > With Rapidshare I will have to pay for some space to
keep the
> > > > files
> > > > > > longer than 90 days but it is ad free.
> > > > > >
> > > > > > Haven't decided.
> > > > > >
> > > > > > Two files for you to try are at MF..... the PDF should
give
> > you a
> > > > > > quick test of the download.
> > > > > >
> > > > > > Refer to Mirror Site links:
> > > > > >
> > > > > > http://zboard.wordpress.com/downloads/
> > <http://zboard.wordpress.com/downloads/>
> > > > > >
> > > > > > Future:
> > > > > >
> > > > > > - may upload the stress test files
> > > > > > - I have a math method in mind to bypass the number
crunching
> > > > > > - the math formula would make it pretty easy to do in AFL
> > except
> > > > it
> > > > > > needs a trade array (workarounds possible with current AB
> > version
> > > > I
> > > > > > guess)
> > > > > > - part 2 files explore sample error/variance (if they are
> > going
> > > > > > somewhere I will post on that ... I recall I did find some
> > > > > > interesting relationships in error propogation but I
haven't
> > > > looked
> > > > > > at it for a couple of years)
> > > > > >
> > > > > > Let me know if you can't download from mediafire
> > > > > >
> > > > > > OR if you can recommend a good filesharing site
> > > > > >
> > > > > > brian
> > > > > >
> > > > > >
> > > > > > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com> <amibroker%
> > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> >
> > > > 40yahoogroups.com <http://40yahoogroups.com>>,
> > > > > > "brian_z111" <brian_z111@> wrote:
> > > > > > >
> > > > > > > The BS file is too big for Yahoo group files ... also it
> > would
> > > > clog
> > > > > > > up limited space.
> > > > > > >
> > > > > > > I thought about AB third party but I have to
> > download/maintain
> > > > > > third
> > > > > > > party software to FTP upload.... that annoys me
somewhat (I
> > am a
> > > > > > very
> > > > > > > independent type).
> > > > > > >
> > > > > > > The Zboard/WordPress arrangement is a trial ... if
it goes
> > > > smoothly
> > > > > > I
> > > > > > > will keep it going for a while.
> > > > > > >
> > > > > > > I am happy with the WordPress (limited filetype/space)
> > > > arrangement,
> > > > > > > with a file host for sharing.
> > > > > > >
> > > > > > > So, now I will consider other filesharing hosts.
> > > > > > >
> > > > > > > Anyone you can download from?
> > > > > > >
> > > > > > > I can put one somewhere else for you.
> > > > > > >
> > > > > > >
> > > > > > > Don't worry I will make sure you get one, way or
another.
> > > > > > >
> > > > > > > Better to get another host though because there will
be at
> > least
> > > > > > one
> > > > > > > more big file ..... if I keep going there might be
plugins
> > one
> > > > day
> > > > > > so
> > > > > > > I need a universal host.
> > > > > > >
> > > > > > >
> > > > > > > brian_z111
> > > > > > >
> > > > > > > Zboard.wordpress.com <http://Zboard.wordpress.com>
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com> <amibroker%
> > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> >
> > > > 40yahoogroups.com <http://40yahoogroups.com>>,
> > > > Howard B
> > > > > > <howardbandy@> wrote:
> > > > > > > >
> > > > > > > > Hi Brian --
> > > > > > > >
> > > > > > > > I use a Hughes satellite connection to the
Internet. It
> > seems
> > > > > > that
> > > > > > > Hughes
> > > > > > > > appears to Rapidshare as a single user (which is
always
> > over
> > > > its
> > > > > > > limit), so
> > > > > > > > I am never able to download a Rapidshare file. If
> > possible,
> > > > > > could
> > > > > > > you
> > > > > > > > upload the files to the Yahoo AmiBroker file section?
> > > > > > > >
> > > > > > > > Thanks,
> > > > > > > > Howard
> > > > > > > >
> > > > > > > >
> > > > > > > > On Sat, Feb 7, 2009 at 9:10 PM, brian_z111
<brian_z111@>
> > > > wrote:
> > > > > > > >
> > > > > > > > > I am using Rapidshare for file sharing.
> > > > > > > > >
> > > > > > > > > Free downloads are available but they are slower
than
> > paid
> > > > > > > download
> > > > > > > > > and limited to 1 download per time ... wait a
while and
> > you
> > > > can
> > > > > > > > > download again (still good value for my customers).
> > > > > > > > >
> > > > > > > > >
> > > > > >
> > http://rapidshare.com/files/195190948/BinomialMaster_ABVersion.xls
> >
<http://rapidshare.com/files/195190948/BinomialMaster_ABVersion.xls>
> > > > > > > > >
> > > > > > > > > A short ReadMe, to help understand the file, is at:
> > > > > > > > >
> > > > > > > > > http://zboard.wordpress.com/
> > <http://zboard.wordpress.com/>
> > > > > > > > >
> > > > > > > > > I can answer a few questions about the details
in the
> > file
> > > > for a
> > > > > > > > > limited time (while my memory is fresh) .... post
> > > > questions, if
> > > > > > > any,
> > > > > > > > > via comments at the Zboard.
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com> <amibroker%
> > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> > > > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> > > > > > 40yahoogroups.com <http://40yahoogroups.com>>,
> > > > > > > > > "brian_z111" <brian_z111@> wrote:
> > > > > > > > > >
> > > > > > > > > > File limits prevented me uploading the
> > BinomialSimulation
> > > > file
> > > > > > > (s)
> > > > > > > > > to
> > > > > > > > > > this group ... 20MB per file. I will post
links to at
> > > > least
> > > > > > one
> > > > > > > > > > example, at the following temporary site, sometime
> > this
> > > > week:
> > > > > > > > > >
> > > > > > > > > > http://zboard.wordpress.com/
> > <http://zboard.wordpress.com/>
> > > > > > > > > >
> > > > > > > > > > I will post some basic notes afterall because the
> > task of
> > > > > > > following
> > > > > > > > > > the Excel sheets would be beyond anyone
without them.
> > > > > > > > > >
> > > > > > > > > > The site might live on for a while after that.
> > > > > > > > > >
> > > > > > > > > >
> > > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com> <amibroker%
> > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> > > > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> > > >
> > > > > > 40yahoogroups.com <http://40yahoogroups.com>>,
> > > > > > > > > "brian_z111" <brian_z111@> wrote:
> > > > > > > > > > >
> > > > > > > > > > > I decided to post the Binomial Simulation
files a
> > few
> > > > days
> > > > > > > > > ago ...
> > > > > > > > > > I
> > > > > > > > > > > am not going to announce the upload so this
post is
> > the
> > > > > > > > > discussion
> > > > > > > > > > > link for them (one or more files will appear
at some
> > > > stage).
> > > > > > > > > > >
> > > > > > > > > > > FTR They do predict the eq dist quite well, for
> > biased
> > > > and
> > > > > > > none
> > > > > > > > > > > biased 'coins' but there is one thing about them
> > that
> > > > does
> > > > > > > > > concern
> > > > > > > > > > > me ... I referenced the same synthetic trade
series
> > to
> > > > make
> > > > > > > the
> > > > > > > > > > > binomial distribution and to create the
synthetic eq
> > > > > > > curves ...
> > > > > > > > > > that
> > > > > > > > > > > seems a bit incestuous in some ways.
> > > > > > > > > > >
> > > > > > > > > > > On the other hand they could be full of
incorrect
> > math
> > > > > > > > > assumptions
> > > > > > > > > > > cos I got the math off Wikipedia!
> > > > > > > > > > >
> > > > > > > > > > > Guru Brian ;-)
> > > > > > > > > > >
> > > > > > > > > > >
> > > > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com><amibroker%
> > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> > > > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> > > >
> > > > > > > 40yahoogroups.com <http://40yahoogroups.com>>,
> > > > > > > > > "brian_z111" <brian_z111@>
> > > > > > > > > wrote:
> > > > > > > > > > > >
> > > > > > > > > > > >
> > > > > > > > > > > > > This is a valid model as long as
stationarity
> > > > holds ...
> > > > > > I
> > > > > > > > > have
> > > > > > > > > > > > > simulated random trading 'systems' and
> > predicted the
> > > > > > > outcome
> > > > > > > > > by
> > > > > > > > > > > > using
> > > > > > > > > > > > > binomial probability, that references a
> > frequency
> > > > > > > > > distribution
> > > > > > > > > > of
> > > > > > > > > > > > the
> > > > > > > > > > > > > randomly generated trades, and it
predicted the
> > > > actual
> > > > > > > equity
> > > > > > > > > > > > > distributions extremely well (a
lognormal dist
> > > > appears
> > > > > > at
> > > > > > > > > very
> > > > > > > > > > > high
> > > > > > > > > > > > > N's).
> > > > > > > > > > > >
> > > > > > > > > > > >
> > > > > > > > > > > > More precisely, I have simulated trade series,
> > using
> > > > the
> > > > > > > RNG in
> > > > > > > > > > > > Excel, for random walks (50/50 systems)
and biased
> > > > > > systems,
> > > > > > > > > with
> > > > > > > > > > > > normally distributed trade series (I used
> > > > > > > CentralLimitThereom
> > > > > > > > > to
> > > > > > > > > > > > create NormDists from the uniform output
of the
> > > > generator.
> > > > > > > > > > > >
> > > > > > > > > > > > I simulated equity curves, using the synthetic
> > trades,
> > > > > > and
> > > > > > > at
> > > > > > > > > the
> > > > > > > > > > > > same time used BinomialProb to model the
predicted
> > > > > > > distribution
> > > > > > > > > > of
> > > > > > > > > > > > the eq curves (I imagined I was tossing a coin
> > with
> > > > > > variable
> > > > > > > > > > values
> > > > > > > > > > > > for heads and tails ... of course in
trading we
> > can
> > > > win
> > > > > > > lose or
> > > > > > > > > > > draw
> > > > > > > > > > > > whereas in my model we can only win or lose).
> > > > > > > > > > > >
> > > > > > > > > > > > You might like to see the files?
> > > > > > > > > > > >
> > > > > > > > > > > > I am bored with that topic.
> > > > > > > > > > > >
> > > > > > > > > > > > I am not a mathematician ... it might be a
load
> > of old
> > > > > > > rubbish
> > > > > > > > > > for
> > > > > > > > > > > > all I know.
> > > > > > > > > > > >
> > > > > > > > > > > > As our discussion shows .. we can't get any
> > > > statistical
> > > > > > > > > certainty
> > > > > > > > > > > > anywhere in trading ... only
approximations and
> > > > > > > probabilties.
> > > > > > > > > > > >
> > > > > > > > > > > > It is just another approximation, like MCS and
> > > > involves
> > > > > > > massive
> > > > > > > > > > > > number crunching.
> > > > > > > > > > > >
> > > > > > > > > > > > I didn't finish it because I wanted a
quick and
> > dirty
> > > > > > > method.
> > > > > > > > > > > >
> > > > > > > > > > > > The files are rough as old bags.
> > > > > > > > > > > >
> > > > > > > > > > > > I didn't make notes so even I have a hard time
> > > > following
> > > > > > the
> > > > > > > > > > > > logic ... I had a look at them the other day I
> > had to
> > > > > > start
> > > > > > > > > > tracing
> > > > > > > > > > > > the formulas in the cells to see how I had
done
> > it.
> > > > > > > > > > > >
> > > > > > > > > > > > I'll post some of them in the file section
one day
> > > > (Howard
> > > > > > > > > > collects
> > > > > > > > > > > > trading things).
> > > > > > > > > > > >
> > > > > > > > > > > > I won't scrub them up though ... take them or
> > leave
> > > > > > them ...
> > > > > > > > > > sorry
> > > > > > > > > > > no
> > > > > > > > > > > > questions or explanations (anyway Howard
and other
> > > > maths
> > > > > > > people
> > > > > > > > > > > know
> > > > > > > > > > > > how to do that stuff).
> > > > > > > > > > > >
> > > > > > > > > > > >
> > > > > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com><amibroker%
> > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> > > > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> > > >
> > > > > > > 40yahoogroups.com <http://40yahoogroups.com>>,
> > > > > > > > > "brian_z111" <brian_z111@>
> > > > > > > > > > wrote:
> > > > > > > > > > > > >
> > > > > > > > > > > > > Gidday Mate,
> > > > > > > > > > > > >
> > > > > > > > > > > > > I wasn't planning on posting again today
as I am
> > > > going
> > > > > > > away
> > > > > > > > > for
> > > > > > > > > > a
> > > > > > > > > > > > few
> > > > > > > > > > > > > days ..... a good question though so I
couldn't
> > > > resist.
> > > > > > > > > > > > >
> > > > > > > > > > > > >
> > > > > > > > > > > > > I did notice Fred's comment on the
priority he
> > > > places on
> > > > > > > > > > > > sensitivity
> > > > > > > > > > > > > analysis.
> > > > > > > > > > > > >
> > > > > > > > > > > > > He has made the comment before and I came to
> > that
> > > > view
> > > > > > > > > > > > independently
> > > > > > > > > > > > > a way back anyway (Howard's random noise
test is
> > > > another
> > > > > > > > > > > > interesting
> > > > > > > > > > > > > idea for single sample analysis).
> > > > > > > > > > > > >
> > > > > > > > > > > > > I also recall that he doesn't believe
> > scrambling the
> > > > > > > order of
> > > > > > > > > > the
> > > > > > > > > > > > > trades provides any meaningful feedback.
> > > > > > > > > > > > >
> > > > > > > > > > > > > That isn't a reason for me not to reach
my own
> > > > > > > conclusions.
> > > > > > > > > > > > >
> > > > > > > > > > > > > Fred has also talked about small N retesting
> > (walk
> > > > > > > forward),
> > > > > > > > > > and
> > > > > > > > > > > > > adjusting his system rules, on a short term
> > basis,
> > > > so
> > > > > > > while I
> > > > > > > > > > am
> > > > > > > > > > > > not
> > > > > > > > > > > > > keen on the idea I am keeping an open
mind on
> > the
> > > > > > subject.
> > > > > > > > > > > > >
> > > > > > > > > > > > >
> > > > > > > > > > > > >
> > > > > > > > > > > > > > This is the second time in the >past few
> > > > > > > > > > > > > > days that you seem to have equated
> > > > trading/backtesting
> > > > > > > > > system
> > > > > > > > > > > > > >outcomes
> > > > > > > > > > > > > > to a random series of coin flip outcomes
> > (random
> > > > > > binary
> > > > > > > > > > > > occurances).
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > Serious question... what is your
point? What
> > is
> > > > the
> > > > > > > > > > relevence
> > > > > > > > > > > os
> > > > > > > > > > > > > >the
> > > > > > > > > > > > > > "Coin Flip" metaphor where trading
systems is
> > > > > > concerned?
> > > > > > > > > > > > >
> > > > > > > > > > > > > Well, developers are selling software
> > specifically
> > > > > > > designed
> > > > > > > > > for
> > > > > > > > > > > > > performing MSC for trading analysis and at
> > least one
> > > > > > guy
> > > > > > > has
> > > > > > > > > > > > written
> > > > > > > > > > > > > a book on the subject.
> > > > > > > > > > > > >
> > > > > > > > > > > > > In both software packages, that I have some
> > > > familiarity
> > > > > > > with,
> > > > > > > > > > > their
> > > > > > > > > > > > > model assumes stationarity, and independency
> > i.e.
> > > > their
> > > > > > > model
> > > > > > > > > > > > treats
> > > > > > > > > > > > > the data as if it is the outcome of a
coin toss
> > with
> > > > > > > variable
> > > > > > > > > > > > values
> > > > > > > > > > > > > on the +- side of the coin.
> > > > > > > > > > > > >
> > > > > > > > > > > > > This is a valid model as long as
stationarity
> > > > holds ...
> > > > > > I
> > > > > > > > > have
> > > > > > > > > > > > > simulated random trading 'systems' and
> > predicted the
> > > > > > > outcome
> > > > > > > > > by
> > > > > > > > > > > > using
> > > > > > > > > > > > > binomial probability, that references a
> > frequency
> > > > > > > > > distribution
> > > > > > > > > > of
> > > > > > > > > > > > the
> > > > > > > > > > > > > randomly generated trades, and it
predicted the
> > > > actual
> > > > > > > equity
> > > > > > > > > > > > > distributions extremely well (a
lognormal dist
> > > > appears
> > > > > > at
> > > > > > > > > very
> > > > > > > > > > > high
> > > > > > > > > > > > > N's).
> > > > > > > > > > > > >
> > > > > > > > > > > > > The value, to me in that model, is that
it is a
> > > > > > training
> > > > > > > tool
> > > > > > > > > > > that
> > > > > > > > > > > > > conditioned me to accept variance as
'normal'
> > and
> > > > if the
> > > > > > > > > market
> > > > > > > > > > > is
> > > > > > > > > > > > > stationary then it would have direct
relevance
> > to
> > > > > > > > > trading.....
> > > > > > > > > > > the
> > > > > > > > > > > > > worst case outcome would be that I could
incur
> > > > losses,
> > > > > > > with a
> > > > > > > > > > > > > probability as indicated by the Cumulative
> > > > Distrubution
> > > > > > > > > > Function
> > > > > > > > > > > > for
> > > > > > > > > > > > > the possible equity outcomes (simulation
is one
> > way
> > > > for
> > > > > > > non -
> > > > > > > > > > > > > mathematicians to calc this and view it in a
> > chart).
> > > > > > > > > > > > >
> > > > > > > > > > > > >
> > > > > > > > > > > > > Ask yourself ....
> > > > > > > > > > > > >
> > > > > > > > > > > > > afer you have conducted a successful
OOS, and
> > > > collated
> > > > > > the
> > > > > > > > > > trade
> > > > > > > > > > > > > sample, when you start to trade it do you
> > expect:
> > > > > > > > > > > > >
> > > > > > > > > > > > > - all trades to be the same, or similar, and
> > occur
> > > > with
> > > > > > > the
> > > > > > > > > > same
> > > > > > > > > > > > > frequency (TradeSim),
> > > > > > > > > > > > > - all trades to be the same, or similar, and
> > have
> > > > > > > variations
> > > > > > > > > in
> > > > > > > > > > > the
> > > > > > > > > > > > > frequency (MSA),
> > > > > > > > > > > > > - something else?
> > > > > > > > > > > > >
> > > > > > > > > > > > > Trading, however, is not a coin toss.
> > > > > > > > > > > > >
> > > > > > > > > > > > > It is more like a sample generator that
produces
> > > > trades
> > > > > > > as a
> > > > > > > > > > > result
> > > > > > > > > > > > > of presenting dynamic data to the system
> > (filter).
> > > > > > > > > > > > >
> > > > > > > > > > > > > To what extent could a 'real life' trading
> > system
> > > > > > emulate
> > > > > > > a
> > > > > > > > > > coin
> > > > > > > > > > > > > toss, with variable values ... how could
that
> > come
> > > > > > about?
> > > > > > > > > > > > >
> > > > > > > > > > > > > (interesting that the very functional optF
> > formula
> > > > came
> > > > > > > about
> > > > > > > > > > as
> > > > > > > > > > > > the
> > > > > > > > > > > > > variable value coin toss staking formula).
> > > > > > > > > > > > >
> > > > > > > > > > > > > Is it possible or not?
> > > > > > > > > > > > >
> > > > > > > > > > > > > A lot of people seem to think it is,
judging by
> > > > their
> > > > > > > books
> > > > > > > > > and
> > > > > > > > > > > > > software.
> > > > > > > > > > > > >
> > > > > > > > > > > > > Presumably, when the underlying data
changes,
> > the
> > > > sample
> > > > > > > > > > profile
> > > > > > > > > > > > > (mean, StDev etc) can change and we end
up with
> > a
> > > > > > better
> > > > > > > or
> > > > > > > > > > worse
> > > > > > > > > > > > > outcome than anticipated by the OOS.
> > > > > > > > > > > > >
> > > > > > > > > > > > > So, does the non-stationary behaviour of the
> > markets
> > > > > > > > > invalidate
> > > > > > > > > > > the
> > > > > > > > > > > > > coin toss model?
> > > > > > > > > > > > >
> > > > > > > > > > > > > That is the ineresting question, and I don't
> > know
> > > > the
> > > > > > > answer
> > > > > > > > > to
> > > > > > > > > > > it,
> > > > > > > > > > > > > or even if there is a definite answer.
> > > > > > > > > > > > >
> > > > > > > > > > > > > I was hopeful that people would pick up
on that
> > key
> > > > > > point
> > > > > > > and
> > > > > > > > > > > shed
> > > > > > > > > > > > > some light on the subject.
> > > > > > > > > > > > >
> > > > > > > > > > > > > I know, from my long hours of simulating
random
> > > > data,
> > > > > > what
> > > > > > > > > > random
> > > > > > > > > > > > > behaviour looks like when I see it.
> > > > > > > > > > > > >
> > > > > > > > > > > > > Clearly the markets have a certain amount of
> > random
> > > > > > > behaviour.
> > > > > > > > > > > > >
> > > > > > > > > > > > > Howard commented somewhere, or another, that
> > there
> > > > is a
> > > > > > > > > certain
> > > > > > > > > > > > > amount of randomness in the market (I can't
> > recall
> > > > the
> > > > > > > method
> > > > > > > > > > he
> > > > > > > > > > > > used
> > > > > > > > > > > > > to measure it).
> > > > > > > > > > > > >
> > > > > > > > > > > > > It is quite easy to observe if data has any
> > random
> > > > > > > qualities,
> > > > > > > > > > > > > especially if we measure the core attributes
> > (50/50
> > > > > > heads
> > > > > > > and
> > > > > > > > > > > tails
> > > > > > > > > > > > > and its persistence into 2,3,4 heads in
a row
> > etc).
> > > > > > > > > > > > >
> > > > > > > > > > > > > Once again I ask you to consider:
> > > > > > > > > > > > >
> > > > > > > > > > > > > if I measure the S&P500 index, on close,
and it
> > > > goes up
> > > > > > > > > approx
> > > > > > > > > > 50
> > > > > > > > > > > > and
> > > > > > > > > > > > > down approx 50 (+- variance that is
typical of a
> > > > random
> > > > > > > > > > binomial
> > > > > > > > > > > > > event) and the subsequent second head or
tail
> > follow
> > > > > > with
> > > > > > > 0.5
> > > > > > > > > > > prob
> > > > > > > > > > > > > etc I am justified in considering it top
be a
> > pseudo
> > > > > > > random
> > > > > > > > > > > > binomail
> > > > > > > > > > > > > event?
> > > > > > > > > > > > >
> > > > > > > > > > > > > I have done quick and dirty
measurements, and
> > > > accurate
> > > > > > > > > > > > measurements,
> > > > > > > > > > > > > on dependency (or on its inverse, which is
> > > > > > independency)
> > > > > > > and
> > > > > > > > > > find
> > > > > > > > > > > > > that there is a good deal of
independency in the
> > > > > > markets
> > > > > > > (I
> > > > > > > > > > > posted
> > > > > > > > > > > > > some q&d code to measure that last week).
> > > > > > > > > > > > >
> > > > > > > > > > > > > I have speculated before, on the point,
that the
> > > > > > rational
> > > > > > > > > > market
> > > > > > > > > > > is
> > > > > > > > > > > > > the market that follows fundamental
value, which
> > > > tends
> > > > > > to
> > > > > > > be
> > > > > > > > > >=
> > > > > > > > > > > the
> > > > > > > > > > > > > yearly (macro) timeframe, and,
everything else
> > is
> > > > the
> > > > > > > > > > irrational
> > > > > > > > > > > > > market.
> > > > > > > > > > > > >
> > > > > > > > > > > > > Consider an intraday market ... what is
rational
> > > > about
> > > > > > the
> > > > > > > > > > price
> > > > > > > > > > > > > movement during any given part of the day?
> > > > > > > > > > > > >
> > > > > > > > > > > > > - Draw a trend line on the chart .. we will
> > assume
> > > > that
> > > > > > we
> > > > > > > > > know
> > > > > > > > > > > > what
> > > > > > > > > > > > > a trend is for this exercise, although
that is a
> > > > > > debatable
> > > > > > > > > > point.
> > > > > > > > > > > > >
> > > > > > > > > > > > > - The trend, a straight line, is
rational (it is
> > > > > > perfectly
> > > > > > > > > > > > following
> > > > > > > > > > > > > fundamental value).... it is 2007 and it is
> > up ;-)
> > > > > > > > > > > > >
> > > > > > > > > > > > > - All of the ups and downs that occur
around it
> > are
> > > > > > > > > irrational
> > > > > > > > > > > > > (bucking the trend).
> > > > > > > > > > > > >
> > > > > > > > > > > > > - The trend line goes under the pivot lows.
> > > > > > > > > > > > >
> > > > > > > > > > > > > - Your system buys at the pivot lows and
sells
> > at =
> > > > = 2
> > > > > > > StDev
> > > > > > > > > > > above
> > > > > > > > > > > > > the trend line.
> > > > > > > > > > > > >
> > > > > > > > > > > > > - Place a stop under the trend line at - 1
> > stDev.
> > > > > > > > > > > > >
> > > > > > > > > > > > > - Assume no commission and no slippage.
> > > > > > > > > > > > >
> > > > > > > > > > > > > - Your payoff ratio is 2/1
> > > > > > > > > > > > >
> > > > > > > > > > > > > - assume there is no variance in
volatility so
> > the
> > > > PR
> > > > > > is a
> > > > > > > > > > > constant
> > > > > > > > > > > > > value
> > > > > > > > > > > > >
> > > > > > > > > > > > > - the win/loss ratio is determined by
the random
> > > > > > > meandering
> > > > > > > > > of
> > > > > > > > > > > the
> > > > > > > > > > > > > irrational price movements up and down.
> > > > > > > > > > > > >
> > > > > > > > > > > > > Note they are irrational because people are
> > buying
> > > > and
> > > > > > > > > selling
> > > > > > > > > > at
> > > > > > > > > > > > the
> > > > > > > > > > > > > wrong time and for the wrong reasons -
if they
> > were
> > > > > > > rational
> > > > > > > > > > they
> > > > > > > > > > > > > would only be buying selling as fundamental
> > values
> > > > > > change.
> > > > > > > > > > > > >
> > > > > > > > > > > > > - the trade series produced would look
exactly
> > that
> > > > that
> > > > > > > > > > produced
> > > > > > > > > > > > by
> > > > > > > > > > > > > a coin tossed with +2, -1 value on it.
> > > > > > > > > > > > >
> > > > > > > > > > > > > Now, you have tested this system, OOS,
and it
> > is a
> > > > > > winner.
> > > > > > > > > > > > >
> > > > > > > > > > > > > What chance for stationarity when you trade
> > live?
> > > > > > > > > > > > >
> > > > > > > > > > > > > If the trend continues there is a very good
> > chance
> > > > that
> > > > > > > the
> > > > > > > > > > > random
> > > > > > > > > > > > > emualator (system meeting dynamic data) will
> > > > continue to
> > > > > > > > > > perform
> > > > > > > > > > > > like
> > > > > > > > > > > > > a biased coin +- variance i.e. the
payoff ratio
> > > > can't
> > > > > > > change
> > > > > > > > > > but
> > > > > > > > > > > > the
> > > > > > > > > > > > > W/L will (it always does when I toss a
coin).
> > > > > > > > > > > > >
> > > > > > > > > > > > > If the trend changes your winning model
will be
> > more
> > > > > > > likely
> > > > > > > > > to
> > > > > > > > > > > bust.
> > > > > > > > > > > > >
> > > > > > > > > > > > > That could be the reason Fred, and
others, like
> > to
> > > > > > > > > continually
> > > > > > > > > > > > retest.
> > > > > > > > > > > > >
> > > > > > > > > > > > > I have another approach to getting
around this
> > > > problem
> > > > > > > (this
> > > > > > > > > is
> > > > > > > > > > > > > actually the real point of my posts) ...
> > > > > > > > > > > > >
> > > > > > > > > > > > > ..... to accomodate non-stationarity either
> > adjust
> > > > > > > quickly OR
> > > > > > > > > > use
> > > > > > > > > > > a
> > > > > > > > > > > > > dimensionless model e.g. don't believe in
> > trends and
> > > > > > then
> > > > > > > you
> > > > > > > > > > > can't
> > > > > > > > > > > > > be on the wrong side of them.
> > > > > > > > > > > > >
> > > > > > > > > > > > >
> > > > > > > > > > > > >
> > > > > > > > > > > > > However, that is only speculation.
> > > > > > > > > > > > >
> > > > > > > > > > > > > What do you think?
> > > > > > > > > > > > >
> > > > > > > > > > > > >
> > > > > > > > > > > > > Again ... what is the relevance of coin
tosses
> > to
> > > > > > trading
> > > > > > > IMO:
> > > > > > > > > > > > >
> > > > > > > > > > > > >
> > > > > > > > > > > > > - wonderful training tool
> > > > > > > > > > > > > - a good OOS can not predict exactly
what the
> > > > outcome
> > > > > > of
> > > > > > > live
> > > > > > > > > > > > trading
> > > > > > > > > > > > > will be (subject to nonstationarity) and
> > neither can
> > > > > > > > > simulation
> > > > > > > > > > > > (coin
> > > > > > > > > > > > > tossing) but it gives a good
approximation of
> > the
> > > > > > > > > possibilities
> > > > > > > > > > > > (also
> > > > > > > > > > > > > subject to non-stationarity).
> > > > > > > > > > > > >
> > > > > > > > > > > > > As a quid pro quo .....
> > > > > > > > > > > > >
> > > > > > > > > > > > > ..... if you, or anyone else, can give
me any
> > > > > > explanation
> > > > > > > > > > and/or
> > > > > > > > > > > > > proof that the coin toss metaphor has no
> > relevance
> > > > to
> > > > > > > trading
> > > > > > > > > I
> > > > > > > > > > > > would
> > > > > > > > > > > > > be delighted.
> > > > > > > > > > > > >
> > > > > > > > > > > > >
> > > > > > > > > > > > > Anyway, I think Patrick already answered the
> > > > question,
> > > > > > or
> > > > > > > > > told
> > > > > > > > > > us
> > > > > > > > > > > > > where to find it.
> > > > > > > > > > > > >
> > > > > > > > > > > > > Good luck with your trading.
> > > > > > > > > > > > >
> > > > > > > > > > > > > brian_zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz
> > > > > > > > > > > > >
> > > > > > > > > > > > >
> > > > > > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com><amibroker%
> > 40yahoogroups.com <http://40yahoogroups.com>>
> > > > <amibroker%
> > > > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> > > >
> > > > > > > 40yahoogroups.com <http://40yahoogroups.com>>,
> > > > > > > > > "Phsst" <phsst@> wrote:
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > Hello Brian,
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > Thanks for the mention in your New Years
> > post. I
> > > > felt
> > > > > > > > > > humbled
> > > > > > > > > > > to
> > > > > > > > > > > > > be in
> > > > > > > > > > > > > > the same honerable mention list as
Fred (He
> > is a
> > > > very
> > > > > > > smart
> > > > > > > > > > > Dude
> > > > > > > > > > > > (no
> > > > > > > > > > > > > > kidding!)) It took me a while (some years
> > back) to
> > > > > > > figure
> > > > > > > > > out
> > > > > > > > > > > > what a
> > > > > > > > > > > > > > smart guy Fred really is. I've since
learned
> > that
> > > > > > when
> > > > > > > Fred
> > > > > > > > > > > > speaks,
> > > > > > > > > > > > > it
> > > > > > > > > > > > > > pays to think and be silent for a good
long
> > while
> > > > > > before
> > > > > > > > > > > drawing
> > > > > > > > > > > > any
> > > > > > > > > > > > > > conclusions.
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > To your "crystal clear" point... This
is the
> > > > second
> > > > > > > time in
> > > > > > > > > > the
> > > > > > > > > > > > > past few
> > > > > > > > > > > > > > days that you seem to have equated
> > > > trading/backtesting
> > > > > > > > > system
> > > > > > > > > > > > > outcomes
> > > > > > > > > > > > > > to a random series of coin flip outcomes
> > (random
> > > > > > binary
> > > > > > > > > > > > occurances).
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > Serious question... what is your
point? What
> > is
> > > > the
> > > > > > > > > > relevence
> > > > > > > > > > > os
> > > > > > > > > > > > > the
> > > > > > > > > > > > > > "Coin Flip" metaphor where trading
systems is
> > > > > > concerned?
> > > > > > > > > > What
> > > > > > > > > > > am
> > > > > > > > > > > > I
> > > > > > > > > > > > > > missing?
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > Your Bud... Phsst
> > > > > > > > > > > > > >
> > > > > > > > > > > > > >
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > This is the second time
> > > > > > > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com><amibroker%
> > 40yahoogroups.com <http://40yahoogroups.com>>
> > > > <amibroker%
> > > > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> > > >
> > > > > > > 40yahoogroups.com <http://40yahoogroups.com>>,
> > > > > > > > > "brian_z111"
> > > > > > > > > <brian_z111@>
> > > > > > > > > > > > wrote:
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > To be chrystal clear about my
hypothesis:
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > We are trying to design a system that
> > produces
> > > > the
> > > > > > > same
> > > > > > > > > set
> > > > > > > > > > of
> > > > > > > > > > > > > > > trades, in the future, as it has in the
> > past i.e
> > > > > > > trades
> > > > > > > > > and
> > > > > > > > > > > not
> > > > > > > > > > > > > > > combinations of trades.
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > If a solid gold coin, minted by the US
> > treasury,
> > > > > > with
> > > > > > > a
> > > > > > > > > > head
> > > > > > > > > > > > and a
> > > > > > > > > > > > > > > tail clearly stamped on each side,
and only
> > two
> > > > > > > values +1
> > > > > > > > > > or -
> > > > > > > > > > > 1
> > > > > > > > > > > > > can't
> > > > > > > > > > > > > > > reproduce two equity curves that
look the
> > same,
> > > > > > after
> > > > > > > N
> > > > > > > > > > > tosses,
> > > > > > > > > > > > > how
> > > > > > > > > > > > > > > can we expect a trading system to do
that
> > when
> > > > it
> > > > > > has
> > > > > > > a
> > > > > > > > > > range
> > > > > > > > > > > of
> > > > > > > > > > > > > > > possible values?
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > AND it doesn't get any better as N
> > increases.
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > Put your time and effort into
maximising the
> > > > > > STABILITY
> > > > > > > > > > > > > > > (predictability, boundness) of the trade
> > > > set 'with
> > > > > > an
> > > > > > > > > edge'
> > > > > > > > > > > > THEN
> > > > > > > > > > > > > use
> > > > > > > > > > > > > > > MM to optimise the equity outcome
the system
> > > > > > produces
> > > > > > > > > > > (optimise
> > > > > > > > > > > > ==
> > > > > > > > > > > > > > > your definition e.g. max return, min
risk or
> > > > > > > whatever).
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com><amibroker%
> > 40yahoogroups.com <http://40yahoogroups.com>>
> > > > <amibroker%
> > > > 40yahoogroups.com <http://40yahoogroups.com>><amibroker%
> > > >
> > > > > > > 40yahoogroups.com <http://40yahoogroups.com>>,
> > > > > > > > > "brian_z111"
> > > > > > > > > brian_z111@
> > > > > > > > > > > > wrote:
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > Howard,
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > Thanks for your post.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > A very well written article.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > Some contrary comment (first
referencing
> > some
> > > > of
> > > > > > > your
> > > > > > > > > > > points
> > > > > > > > > > > > and
> > > > > > > > > > > > > > > > then, later, some comments of my own):
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > > By trying many
> > > > > > > > > > > > > > > > > combinations of logic and parameter
> > values,
> > > > we
> > > > > > > will
> > > > > > > > > > > > eventually
> > > > > > > > > > > > > > > find
> > > > > > > > > > > > > > > > >a system that is profitable for
the date
> > > > range
> > > > > > > > > analyzed.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > You are assuming that all
successful long
> > term
> > > > > > > traders
> > > > > > > > > > > > arrived
> > > > > > > > > > > > > at
> > > > > > > > > > > > > > > > their system(s) by using this
approach ...
> > > > perhaps
> > > > > > > > > there
> > > > > > > > > > > are
> > > > > > > > > > > > > > > systems
> > > > > > > > > > > > > > > > out there that have no optimiseable
> > parameters
> > > > > > and
> > > > > > > only
> > > > > > > > > > one
> > > > > > > > > > > > > > > > underlying logic.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > If so they are likely be based on
primal
> > > > market
> > > > > > > > > behaviour
> > > > > > > > > > > and
> > > > > > > > > > > > > > > > therefore persistent across
markets and
> > time
> > > > i.e
> > > > > > > they
> > > > > > > > > > would
> > > > > > > > > > > > > have to
> > > > > > > > > > > > > > > > be systems based on market
characteristics
> > > > that
> > > > > > are
> > > > > > > > > > > relatively
> > > > > > > > > > > > > > > > stationary.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > > testing the
> > > > > > > > > > > > > > > > > profitability of a trading
system that
> > was
> > > > > > > developed
> > > > > > > > > > > using
> > > > > > > > > > > > > recent
> > > > > > > > > > > > > > > > >data
> > > > > > > > > > > > > > > > > on older data is guaranteed to over-
> > > > estimate the
> > > > > > > > > > > > > profitability of
> > > > > > > > > > > > > > > > the
> > > > > > > > > > > > > > > > > trading system.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > You know that in science
> > (philosophy/logic) it
> > > > > > only
> > > > > > > > > takes
> > > > > > > > > > > one
> > > > > > > > > > > > > > > > refutation to dethrone the current
ruling
> > > > > > > hypothesis ...
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > if a long system, developed on the
last 12
> > > > months
> > > > > > of
> > > > > > > > > data
> > > > > > > > > > > > (when
> > > > > > > > > > > > > the
> > > > > > > > > > > > > > > > market was experiencing a bear
riot) is
> > then
> > > > > > tested
> > > > > > > OOS
> > > > > > > > > > on
> > > > > > > > > > > the
> > > > > > > > > > > > > > > prior
> > > > > > > > > > > > > > > > years data it will outperform the in
> > sample
> > > > tests
> > > > > > > (OOS
> > > > > > > > > > > would
> > > > > > > > > > > > be
> > > > > > > > > > > > > > > > conducted on bull market data).
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > > There is very little reason to
expect
> > that
> > > > > > future
> > > > > > > > > > > behavior
> > > > > > > > > > > > and
> > > > > > > > > > > > > > > > > profitability of well known trading
> > systems
> > > > > > will
> > > > > > > be
> > > > > > > > > the
> > > > > > > > > > > > same
> > > > > > > > > > > > > as
> > > > > > > > > > > > > > > past
> > > > > > > > > > > > > > > > > behavior.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > Do we have any empirical evidence
of this?
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > First we would have to have an agreed
> > > > definition
> > > > > > > > > of 'well
> > > > > > > > > > > > > known',
> > > > > > > > > > > > > > > > make a list of the systems, and then
> > perform
> > > > > > massive
> > > > > > > > > > > testing.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > To scrupulously prevent any bias
creeping
> > > > testing
> > > > > > > would
> > > > > > > > > > > have
> > > > > > > > > > > > to
> > > > > > > > > > > > > be
> > > > > > > > > > > > > > > > conducted live, and not on historical
> > data.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > We only know that they were
> > successful 'in the
> > > > > > > past' by
> > > > > > > > > > IS
> > > > > > > > > > > > > testing,
> > > > > > > > > > > > > > > > or by claim.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > Do we have any, or many, certified
> > performance
> > > > > > > records
> > > > > > > > > > > > provided
> > > > > > > > > > > > > by
> > > > > > > > > > > > > > > > traders who claim to have had
success with
> > > > > > > those 'well
> > > > > > > > > > > known'
> > > > > > > > > > > > > > > systems.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > > Statistics gathered from in-sample
> > results
> > > > have
> > > > > > > > > > > > > > > > > no relationship to statistics
that will
> > be
> > > > > > > gathered
> > > > > > > > > > from
> > > > > > > > > > > > > trading.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > Not, so.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > They have every bearing on the stats
> > gathered
> > > > in
> > > > > > > > > trading
> > > > > > > > > > > > because
> > > > > > > > > > > > > > > only
> > > > > > > > > > > > > > > > systems with good IS performance
make it
> > to
> > > > the
> > > > > > OS,
> > > > > > > or
> > > > > > > > > > live
> > > > > > > > > > > > > > > trading,
> > > > > > > > > > > > > > > > phase.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > OOS testing is only proceeded with
> > because the
> > > > > > > analyst
> > > > > > > > > > has
> > > > > > > > > > > > every
> > > > > > > > > > > > > > > > expectation, or hope, that the good IS
> > stats
> > > > will
> > > > > > be
> > > > > > > > > > > > reproduced
> > > > > > > > > > > > > OOS.
> > > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > > In fact it is the relative performance
> > between
> > > > > > the
> > > > > > > IS
> > > > > > > > > and
> > > > > > > > > > > OOS
> > > > > > > > > > > > > stats
> > > > > > > > > > > > > > > > the encourages us to proceed or abort.
> > > > > > > > > > > > > > > >
...

[Message clipped]  



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