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%
>
>
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http://40yahoogroups.com>><amibroker%
>
> > >
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>
> > >
> > > > > > >
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%
>
>
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>
> > >
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>
> > >
> > > > > > >
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%
>
>
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>
> > > <amibroker%
> > > >
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>
> > >
> > > > > > >
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.
> > > > > > >
> > > > > > > > >