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Brian,
the only plausible explanation that comes to my mind is that the IS equity at
the beginning of IS2 is different from the OOS equity at the beginning of OOS1.
These capital restraints might result in a diifferent number of trades.
Regards,
Thomas
On 14.07.2009, 06:10:14 brianw468 wrote:
> Hi Mike,
> And thanks for your comments. However, the main point I must emphasise is
> that the OOS1 and IS2 time periods are identical, which is why I find the
> results so disturbing. Regardless of the fitness function used, the new IS
> results should at least be able to equal those from the previous OOS, given
> that an exhaustive search was used. For the record, I used 6 month time
> periods for both OOS and IS runs, and RAR/MDD as the function to be
> optimised, based on Howard Bandy's suggestion. My desire is to develop a
> system that will potentially stay in trades for a considerable time,
> provided the stock behaves. I believe that extending the timeframes to get
> more samples would be unlikely to improve matters, because of changes in
> the market characteristics over a longer period. However, I might
> experiment with other fitness functions, even reverting to the simple Net
> Profit.
>
> I hope that either TJ or Howard B might be tempted to comment on the basic
> issue here - i.e. why can't an exhaustive IS run at least equal the results
> from the previous OOS run, when the time periods used are identical?
>
> Brian
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Mike" <sfclimbers@xxx> wrote:
> > Hi,
> >
> > If your IS time frame is not the same as your OOS time frame (e.g 2 year
> > IS with rolling 6 month OOS) then the values used in the preceding OOS
> > can end up more profitable than the optimized values over the following
> > IS since the IS period is optimized over a different (e.g. longer) data
> > set.
> >
> > P.S.
> >
> > I would not trust any walk forward that was only producing 1 or 2 trades
> > IS. While no amount of trades IS can completely predict what will happen
> > OOS, all of your performance calculations (i.e. fitness function) are
> > based on IS statistics, and 1 or 2 trades are simply too few data points
> > to calculate any kind of meaningful statistic.
> >
> > I would suggest extending your IS time frame to capture more trades such
> > that the statistics have a chance to level out. 30 is the number usually
> > suggested to get a normally distributed sample. Your next OOS period
> > would then be less likely to be based on an IS fluke.
> >
> > Mike
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "brianw468" <wild21@> wrote:
> > > Hi
> > > I recently tested a trading system but got some strange results from
> > > the WF test. The WF process used exhaustive optimization. An extract
> > > from the results (too large to reproduce in full) is:- Item Profit
> > > No. Trades
> > > IS1 533 1
> > > OOS1 1126 2
> > >
> > > IS2 474 1
> > > OOS2 -537 2
> > >
> > > IS3 43 1
> > > OOS 784 2
> > >
> > > In two cases the OOS results are better than the preceding IS results.
> > > Though a little surprising,this is quite plausible, because the time
> > > periods differ. However,the IS2 profit is much poorer than the OOS1
> > > profit, and this is a worry since exhaustive optimization is used, and
> > > the time periods are the same. Can anyone offer an explanation? Would
> > > it lie in the way profit is handled when a trade is not completed by
> > > the end of the selected period?
> > >
> > > Thanks
> > > Brian
>
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