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[amibroker] Re: Monte Carlo analysis for trading systems



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Rich and Keith,


Thanks for the feedback.


Re level of interest:

I was referring to the general trading community ... the interest I 
see in other trading forums and books etc.

Generally I agree that the books Howard listed throw a blanket over 
the field.... I am not keen on Van Tharp.

IMO, excluding Howard's work, only Aronson goes further than Pardo 
and introduces some new ideas and methods for our consideration.

I agree with Howard that his work and synchronisation with AB are a 
new and valueable tool i.e. we have a practical and available method 
to test Pardo's methods and develop them further.

Once again it is self-evident that Aronson's work hasn't been 
critically assessed ... not anywhere that I am aware of anyway.

So, even though I am a maths layperson I am thinking critically about 
his propositions and I am sticking my neck out by saying I have a few 
concerns about Masters MCP and I am sceptical, in general, that any 
mathematical method can, or will, detect data-mining bias.

However I don't specialise in optimisation so if someone in the 
community can come forward and say,"I am using MCP in my design and 
evaluation and have been trading successfully with optimised systems 
selected using MCP analyis etc" then that would be great.


Re low levels of interest in the general community:

I think Howards summary list of 'why this is so' covers the field 
very well.... the fact that academia isn't concerned with trading per 
se, that financial time series analysis in academic courses is 
concerned with other issues and that the way the subject is treated, 
in that environment, doesn't translate well for retail traders who 
haven't come from am academic background.
 

Re Aronsons book:


I like his book in general because he is thinking about, and 
discussing, some challenging issues and he has a very good intellect 
with a good sense of humour and entertaining writing style.... I like 
the fact that he forces me to think about it carefully.

I like to push the envelope.

I like to go over the basics from someone elses point of view.

By persisting and looking at it from different angles I have picked 
up some knowledge that I initially thought was beyond me.

He does have the academic habit of making a few ideas go a very long 
way though.

Also, while his 'trading psychology' material is very good for a 
layperson, it is basic and could have been left out of the book 
altogether.




--- In amibroker@xxxxxxxxxxxxxxx, "Yofa" <jtoth100@xxx> wrote:
>
> Hi Brian,
> 
> same here. I actually looking at your traders challenge.
> 
> Why did you exclude the trades with no loss and no gain?
> 
> Y
> 
> --------------------------------------------------
> From: "richpach2" <richpach2@xxx>
> Sent: Wednesday, February 25, 2009 9:45 AM
> To: <amibroker@xxxxxxxxxxxxxxx>
> 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@> 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@ 
> >> > <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.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > Re trading the edge erodes the 
edge:
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > It is an assumption that all
> > players are
> >> >     > > trading
> >> >     > > > > > > > > > systems ...
> >> >     > > > > > > > > > > > many
> >> >     > > > > > > > > > > > > > are
> >> >     > > > > > > > > > > > > > > not, in fact the vast majority 
are
> > not....
> >> >     > > those
> >> >     > > > > who
> >> >     > > > > > > > > aren't
> >> >     > > > > > > > > > > > control
> >> >     > > > > > > > > > > > > > > vastly greater sums of money 
than
> > those
> >> >     who
> >> >     > > do.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > It is an assumption that all 
wins
> > erode
> >> >     the
> >> >     > > > > > system ...
> >> >     > > > > > > > > they
> >> >     > > > > > > > > > > > could
> >> >     > > > > > > > > > > > > > be
> >> >     > > > > > > > > > > > > > > just lucky wins that the 
trader can't
> >> >     exploit
> >> >     > > long
> >> >     > > > > > > > term,
> >> >     > > > > > > > > or
> >> >     > > > > > > > > > > > > > > successful wins that the trader
> > doesn't
> >> >     > > sustain
> >> >     > > > > e.g
> >> >     > > > > > > > they
> >> >     > > > > > > > > > > might
> >> >     > > > > > > > > > > > not
> >> >     > > > > > > > > > > > > > > have the capital, use the 
correct
> > staking
> >> >     or
> >> >     > > > > > maintain
> >> >     > > > > > > > > self-
> >> >     > > > > > > > > > > > > > discipline
> >> >     > > > > > > > > > > > > > > in the future.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > Only a very small percentage of
> > traders
> >> >     are
> >> >     > > > > > successful,
> >> >     > > > > > > > > and
> >> >     > > > > > > > > > > > hence
> >> >     > > > > > > > > > > > > > > trading a successful system ...
> > every one
> >> >     else
> >> >     > > > > who
> >> >     > > > > > is
> >> >     > > > > > > > > > trading
> >> >     > > > > > > > > > > is
> >> >     > > > > > > > > > > > > > just
> >> >     > > > > > > > > > > > > > > making noise.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > There are millions of system
> > permutations,
> >> >     > > > > > instruments,
> >> >     > > > > > > > > > > markets,
> >> >     > > > > > > > > > > > > > > staking systems etc ..... how 
many
> >> >     successful
> >> >     > > > > > traders
> >> >     > > > > > > > > would
> >> >     > > > > > > > > > > it
> >> >     > > > > > > > > > > > take
> >> >     > > > > > > > > > > > > > > to exahaust all of the 
successful
> >> >     > > permutations?
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > > The follow-on point, which
> > relates to
> >> >     Monte
> >> >     > > > > Carlo
> >> >     > > > > > > > > > analysis,
> >> >     > > > > > > > > > > is
> >> >     > > > > > > > > > > > > > that
> >> >     > > > > > > > > > > > > > > > rearranging the in-sample 
trades
> > gives
> >> >     no
> >> >     > > > > insight
> >> >     > > > > > > > into
> >> >     > > > > > > > > > the
> >> >     > > > > > > > > > > > future
> >> >     > > > > > > > > > > > > > > > characteristics of the 
system.
> > Yes, you
> >> >     can
> >> >     > > see
> >> >     > > > > > the
> >> >     > > > > > > > > > effect
> >> >     > > > > > > > > > > of
> >> >     > > > > > > > > > > > > > taking
> >> >     > > > > > > > > > > > > > > > the trades in different 
orders.
> > But why
> >> >     > > bother?
> >> >     > > > > > They
> >> >     > > > > > > > > are
> >> >     > > > > > > > > > > still
> >> >     > > > > > > > > > > > > > > > in-sample results and still 
have no
> >> >     value.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > If you are engineering an F1
> > racing car
> >> >     there
> >> >     > > is
> >> >     > > > > > only
> >> >     > > > > > > > > track
> >> >     > > > > > > > > > > > > > > testing/simulation (99.9 of the
> > time) and
> >> >     > > racing
> >> >     > > > > > > > > > performance
> >> >     > > > > > > > > > > > (1% of
> >> >     > > > > > > > > > > > > > > the time).
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > The more information you gather
> > off the
> >> >     track
> >> >     > > the
> >> >     > > > > > more
> >> >     > > > > > > > > > likely
> >> >     > > > > > > > > > > > you
> >> >     > > > > > > > > > > > > > are
> >> >     > > > > > > > > > > > > > > to perform on the track OR know
> > what to
> >> >     adjust
> >> >     > > > > and
> >> >     > > > > > when
> >> >     > > > > > > > > to
> >> >     > > > > > > > > > > > adjust
> >> >     > > > > > > > > > > > > > it
> >> >     > > > > > > > > > > > > > > if performance doesn't meet
> > expectations.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > Do you know of any F1 teams 
that don't
> >> >     > > > > > test/simulate?
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > Do you know of any F1 teams 
that only
> >> >     > > > > test/simulate
> >> >     > > > > > > > one,
> >> >     > > > > > > > > or
> >> >     > > > > > > > > > > > > > limited,
> >> >     > > > > > > > > > > > > > > metrics?
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > What is testing if not 'massive
> >> >     examination of
> >> >     > > > > what-
> >> >     > > > > > if
> >> >     > > > > > > > > > > > scenarios'?
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > Re MonteCarlo and stationarity
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > I haven't studied the subject 
in
> > depth.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > Mainly it is has been used 
outside of
> >> >     trading
> >> >     > > and
> >> >     > > > > in
> >> >     > > > > > > > > > > different
> >> >     > > > > > > > > > > > ways
> >> >     > > > > > > > > > > > > > > to the ways that traders use 
it ....
> >> >     possibly
> >> >     > > it
> >> >     > > > > > would
> >> >     > > > > > > > > be
> >> >     > > > > > > > > > > best
> >> >     > > > > > > > > > > > to
> >> >     > > > > > > > > > > > > > > limit trading discussion 
to 'trading
> >> >     > > simulation'
> >> >     > > > > and
> >> >     > > > > > > > drop
> >> >     > > > > > > > > > the
> >> >     > > > > > > > > > > MC
> >> >     > > > > > > > > > > > > > part
> >> >     > > > > > > > > > > > > > > of the name.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > I have only found one book 
devoted
> > to the
> >> >     > > subject
> >> >     > > > > > and I
> >> >     > > > > > > > > > regret
> >> >     > > > > > > > > > > > > > buying
> >> >     > > > > > > > > > > > > > > it .... 'MCS and System 
Trading'
> > by Volker
> >> >     > > > > Butzlaff.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > I have also test driven 
TradeSim
> > and MSA.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > Referencing their trading apps.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > TS arranges the trades, as a 
time
> > series,
> >> >     and
> >> >     > > > > > randomly
> >> >     > > > > > > > > > walks
> >> >     > > > > > > > > > > > > > through
> >> >     > > > > > > > > > > > > > > all permutations to 
simulate 'live
> >> >     > > trading'.....
> >> >     > > > > it
> >> >     > > > > > is
> >> >     > > > > > > > an
> >> >     > > > > > > > > > MM
> >> >     > > > > > > > > > > > test,
> >> >     > > > > > > > > > > > > > of
> >> >     > > > > > > > > > > > > > > some kind, because equity is 
allocated
> >> >     prior
> >> >     > > to
> >> >     > > > > the
> >> >     > > > > > > > walk
> >> >     > > > > > > > > > > > through.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > AB's backtester, in default 
mode, does
> >> >     this
> >> >     > > once.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > I assume other methods could be
> > used ...
> >> >     as
> >> >     > > per my
> >> >     > > > > > > > > pervious
> >> >     > > > > > > > > > > XYZ
> >> >     > > > > > > > > > > > > > > example:
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > - abcXdefghi with simultaneous
> > trades on
> >> >     day
> >> >     > > 4,
> >> >     > > > > > > > > > > > > > > - we can only achieve a finite 
set of
> >> >     > > > > permutations,
> >> >     > > > > > > > > > > > > > > - the outcome of massive 
sampling will
> >> >     tend to
> >> >     > > > > the
> >> >     > > > > > mean
> >> >     > > > > > > > +-
> >> >     > > > > > > > >
> >> >     > > > > > > > > > > > variance,
> >> >     > > > > > > > > > > > > > > - we can simulate the eq 
outcomes
> > using
> >> >     random
> >> >     > > > > > sampling
> >> >     > > > > > > > > of
> >> >     > > > > > > > > > > > uniform
> >> >     > > > > > > > > > > > > > > size, ave the result per random
> > series and
> >> >     > > then
> >> >     > > > > freq
> >> >     > > > > > > > dist
> >> >     > > > > > > > > > the
> >> >     > > > > > > > > > > > means
> >> >     > > > > > > > > > > > > > > (Central Limit Theoreom 
predicts a
> > pseudo
> >> >     norm
> >> >     > > > > > dist).
> >> >     > > > > > > > > > > > > > > > 30 selections per series * ?
> > series will
> >> >     > > > > achieve
> >> >     > > > > > an
> >> >     > > > > > > > > > approx
> >> >     > > > > > > > > > > of
> >> >     > > > > > > > > > > > > > > possible eq outcomes (I'm not 
sure if
> >> >     > > > > distrubtions
> >> >     > > > > > obey
> >> >     > > > > > > > > the
> >> >     > > > > > > > > > > > laws of
> >> >     > > > > > > > > > > > > > > sample error ... I don't think
> > they do).
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > TradeSims real life simulation 
assumes
> >> >     > > > > stationarity
> >> >     > > > > > > > (the
> >> >     > > > > > > > > > > balls
> >> >     > > > > > > > > > > > in
> >> >     > > > > > > > > > > > > > the
> >> >     > > > > > > > > > > > > > > bin, and their values will 
remain
> > constant
> >> >     > > into
> >> >     > > > > the
> >> >     > > > > > > > > future).
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > It also assumes that they will 
be
> > selected
> >> >     > > from
> >> >     > > > > the
> >> >     > > > > > bin
> >> >     > > > > > > > > in
> >> >     > > > > > > > > > > the
> >> >     > > > > > > > > > > > same
> >> >     > > > > > > > > > > > > > > order, or frequency to be 
absolutely
> >> >     correct
> >> >     > > (the
> >> >     > > > > > order
> >> >     > > > > > > > > > > doesn't
> >> >     > > > > > > > > > > > > > > change anything only the
> > frequency)....
> >> >     to be
> >> >     > > > > > precise
> >> >     > > > > > > > > about
> >> >     > > > > > > > > > > it,
> >> >     > > > > > > > > > > > > > their
> >> >     > > > > > > > > > > > > > > model assumes that if you have
> > picked the
> >> >     > > worst
> >> >     > > > > > > > > historical
> >> >     > > > > > > > > > > loss
> >> >     > > > > > > > > > > > out
> >> >     > > > > > > > > > > > > > > of the bin 2/1000 trades that 
you
> > will not
> >> >     > > only
> >> >     > > > > > > > > experience
> >> >     > > > > > > > > > > the
> >> >     > > > > > > > > > > > same
> >> >     > > > > > > > > > > > > > %
> >> >     > > > > > > > > > > > > > > as the worst loss in the future
> > but that
> >> >     it
> >> >     > > will
> >> >     > > > > > also
> >> >     > > > > > > > > only
> >> >     > > > > > > > > > > occur
> >> >     > > > > > > > > > > > > > > 2/1000 times.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > MSA puts all of the balls in 
the
> > bin and
> >> >     > > selects
> >> >     > > > > > them
> >> >     > > > > > > > in
> >> >     > > > > > > > > a
> >> >     > > > > > > > > > > way
> >> >     > > > > > > > > > > > that
> >> >     > > > > > > > > > > > > > > allows new combinations 
(frequencies)
> >> >     until
> >> >     > > all
> >> >     > > > > > possible
> >> >     > > > > > > > > > > > > > frequencies
> >> >     > > > > > > > > > > > > > > are exhausted i.e. they assume
> >> >     stationarity
> >> >     > > only
> >> >     > > > > in
> >> >     > > > > > > > > values
> >> >     > > > > > > > > > > but
> >> >     > > > > > > > > > > > not
> >> >     > > > > > > > > > > > > > > frequency of dist (they assume
> > dist is a
> >> >     > > > > probability
> >> >     > > > > > > > > > > statement
> >> >     > > > > > > > > > > > and
> >> >     > > > > > > > > > > > > > > not a constant or series of
> >> >     constants).... to
> >> >     > > be
> >> >     > > > > > > > precise
> >> >     > > > > > > > > > > about
> >> >     > > > > > > > > > > > it
> >> >     > > > > > > > > > > > > > > they assume that if it can 
happen
> > it will.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > So, stationarity is the issue.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > So many people are confusing
> > variance with
> >> >     > > non-
> >> >     > > > > > > > > > > stationarity ....
> >> >     > > > > > > > > > > > > > they
> >> >     > > > > > > > > > > > > > > are being fooled by randomness 
e.g.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > we know that the trial records 
of fair
> >> >     coin
> >> >     > > > > tosses
> >> >     > > > > > are
> >> >     > > > > > > > > > > > stationary
> >> >     > > > > > > > > > > > > > AND
> >> >     > > > > > > > > > > > > > > they have a surprising range of
> > outcomes
> >> >     > > > > > (variance) ...
> >> >     > > > > > > > > > this
> >> >     > > > > > > > > > > is
> >> >     > > > > > > > > > > > > > very
> >> >     > > > > > > > > > > > > > > easy to see if simulated and
> > expressed as
> >> >     > > equity
> >> >     > > > > > > > outcomes.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > Therefore, in trading, we can, 
at the
> >> >     least
> >> >     > > > > expect a
> >> >     > > > > > > > > > > tremendous
> >> >     > > > > > > > > > > > > > > amount of variance ... no less
> > than what
> >> >     can
> >> >     > > be
> >> >     > > > > > > > expected
> >> >     > > > > > > > > > from
> >> >     > > > > > > > > > > a
> >> >     > > > > > > > > > > > > > coin
> >> >     > > > > > > > > > > > > > > toss experiment ... this 
variance
> > can be
> >> >     > > estimated
> >> >     > > > > > > > using
> >> >     > > > > > > > > > > several
> >> >     > > > > > > > > > > > > > > methods, simulation being one
> > easy, push
> >> >     the
> >> >     > > > > > computer
> >> >     > > > > > > > > > button
> >> >     > > > > > > > > > > and
> >> >     > > > > > > > > > > > > > look
> >> >     > > > > > > > > > > > > > > at the graph method.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > So, the value of the 
simulation is in
> >> >     training
> >> >     > > > > the
> >> >     > > > > > mind
> >> >     > > > > > > > > to
> >> >     > > > > > > > > > > > accept
> >> >     > > > > > > > > > > > > > > variance and mentally prepare 
for the
> >> >     worst
> >> >     > > case
> >> >     > > > > > losses.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > However, it doesn't matter how 
we
> > design
> >> >     our
> >> >     > > > > > systems we
> >> >     > > > > > > > > can
> >> >     > > > > > > > > > > not
> >> >     > > > > > > > > > > > do
> >> >     > > > > > > > > > > > > > > anything about stopping
> > non-stationarity.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > Our system will get wiped out 
in
> > OOS if
> >> >     it is
> >> >     > > not
> >> >     > > > > > > > robust
> >> >     > > > > > > > > OR
> >> >     > > > > > > > > > > if
> >> >     > > > > > > > > > > > the
> >> >     > > > > > > > > > > > > > > market changes.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > If our system is robust it will
> > still get
> >> >     > > wiped
> >> >     > > > > out
> >> >     > > > > > if
> >> >     > > > > > > > > the
> >> >     > > > > > > > > > > > market
> >> >     > > > > > > > > > > > > > > changes.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > However, IMO, non-stationarity 
is
> > not, or
> >> >     need
> >> >     > > > > not
> >> >     > > > > > be,
> >> >     > > > > > > > as
> >> >     > > > > > > > > > > > pervasive
> >> >     > > > > > > > > > > > > > > in trading as we think.
> >> >     > > > > > > > > > > > > > >
> >> >     > > > > > > > > > > > > > > As I have said in the past, and
> > already in
> >> >     > > this
> >> >     > > > > > > > post ...
> >> >     > > > > > > > > > many
> >> >     > > > > > > > > > > > > > traders
> >> >     > > > > > > > > > > > > > > are slayed by the innocuous
> > looking Black
> >> >     > > Swan,
> >> >     > > > > > because
> >> >     >
> >> >     ...
> >> >
> >> >     [Message clipped]  
> >> >
> >> >
> >> >
> >>
> > 
> > 
> > 
> > 
> > ------------------------------------
> > 
> > **** IMPORTANT PLEASE READ ****
> > This group is for the discussion between users only.
> > This is *NOT* technical support channel.
> > 
> > TO GET TECHNICAL SUPPORT send an e-mail directly to 
> > SUPPORT {at} amibroker.com
> > 
> > TO SUBMIT SUGGESTIONS please use FEEDBACK CENTER at
> > http://www.amibroker.com/feedback/
> > (submissions sent via other channels won't be considered)
> > 
> > For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG:
> > http://www.amibroker.com/devlog/
> > 
> > Yahoo! Groups Links
> > 
> > 
> > 
> >
>




------------------------------------

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