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Rick, you answer is the std answer on how to develop a trading plan.
But lets think outside the box for a monent and let me ask you the
following.... If you could optimize the last 250 days (i.e. one years worth
of stk data) what would be the confidences that the optimize indicators
would work for the next 20 days (ie one month). And then at the end of
those 20 days reoptimize the last 250 days and repeat the process.
I assure you the confidence is over 90% accurate.
regards
johnnie
-----Original Message-----
From: Rick Mortellra <rmjapan@xxxxxxxxxxxxxxx>
To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
Date: Thursday, August 06, 1998 11:39 PM
Subject: Re: Optimizing
>Hi Roland,
>
>You are incorrect to think re-optimizing makes for better performance for a
>number of reasons. What you really want to do is known as de-optimization.
>I've posted this before, but below is the proper technique you should use.
>
>1)Use as few parameters as possible and favor systems that show greater
>insensitivity to changes in parameter values.
>
>2)Backtest over as much data as possible, but 5 years minimum is
>recommended. You need a minimum 30 closed trades (buy & sells) to get
>statistically valid results. Anything less over 5 years and you might as
>well trade the 200 day SMA (or 233 for Fib fans!).
>
>3)Check for dependency between trades. While rare, they can exploited.
>
>4)Now FORWARD TEST. Divide up your data set into a minimum of 3 sections.
>More is generally better, but the exact length of each section you choose
is
>really just a function of your system itself. Then do the following:
>
>Optimize over section 1. Trade over section 2.
>Optimize over section 1+2. Trade over 3 etc, ad infinitum.
>
>5)Don't trade the peak parameter, but choose one that has lower performance
>that the one immediately before and after it. Parameter values that are
>close together tend to have similar performance (IF you followed Rule 1!).
>You are better off trading the parameter whose performance will tend to go
>higher than trading the peak, which tends lower. Don't fight the Second Law
>of Thermodynamics aka entropy!
>
>6) IF the system passes successfully steps 1-5 then put this now very
robust
>system in your toolbox and LEAVE IT ALONE. Build another system if the
>"system tinkering bug" bites ya!
>
>Hope this helps,
>Rick
>Tokyo, Japan
>
>
>-----Original Message-----
>From: Roland Beauregard <beau@xxxxxxxxxxxx>
>To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
>Date: Friday, August 07, 1998 10:13 AM
>Subject: Optimizing
>
>
>
>>However, I've been thinking along the same lines as John, that frequently
>>re-optimized parameters logically should produce better results than any
>>specific standard parameters, including Fibs. . . . and of course they do
>>much better in system tests.
>>
>>I'd like to see more discussion on optimization. Has anyone done any
>>extensive testing and validation? Is optimzation a significant factor in
>>anyone's successful trading system? Is there something inherently invalid
>>with optimizing?
>>
>>Comments anyone??
>>
>>Roland
>>
>>At 10:26 AM 8/6/98 -0400, you wrote:
>>>I am not sure if "trading with the wrong parameter" is correct, as you
>>>stated. My belief is that each stk has its own trading characteristics.
>>>Technical analyst in nothing more than measuring supply and demand of
>price.
>>>
>>> And my premise is that the stk characteristic will remain in tack until
>it
>>>changes.
>>>
>>>Most complete trading sysyem have two major general characteristic. One
>is
>>>money management (i.e when to get in, get out and double up) and two, a
>>>history of win vs lost and max drawdowns. And the reason by most people
>do
>>>not make "much money" on system trading is not having the trust when the
>>>system turns against them.
>>>
>>>OminTrader assumes that the stk will be generating the same
charisteristic
>>>and therefore the indicators can be trusted until the characteristics
>>>changes. By being able to rerun the indicators against the stk on a
short
>>>term basis allows re-optimizations of the indicators to the new
>>>characteristic of the stk.
>>>
>>>This is not a guarrentee system. If it was, I would not be writing the
>>>E-mail, but sunning somewhere in Europe counting my winnings. But,
>>>combining with MetaStk to do additional analysis is not a bad way to
>predict
>>>the next short turn move
>>>
>>>regards
>>>johnnie
>>>-----Original Message-----
>>>From: Jan Diederik <jddehaas@xxxxxxx>
>>>To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
>>>Date: Thursday, August 06, 1998 8:44 AM
>>>Subject: RE: Omni Trader 3.5
>>>
>>>
>>>>> -----Original Message-----
>>>>> From: owner-metastock@xxxxxxxxxxxxx
>>>>> [mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of John Scudiero
>>>>> Sent: Thursday, August 06, 1998 1:14 AM
>>>>> To: metastock@xxxxxxxxxxxxx
>>>>> Subject: Re: Omni Trader 3.5
>>>>>
>>>>> OT is the complete opposite of a trading system methodology. It
>>>>> optimizes
>>>>> indicators against a data range you chose, the intent is that the
>price
>>>>> trend of the immediate future is the same as the existing past,
thereby
>>>>> giving you excellent readings based on the indicators. And so
>>>>> many days in the future, you re-run the indicator test to reoptimize
>>>>them.
>>>>
>>>>In my opinion this means that you have been trading with the wrong
>>>>parameters for your indicators. Afterwards you can say which parameter
>you
>>>>should have taken. Pretty frustrating if you ask me ;-)
>>>>
>>>>Regards,
>>>> Jan Diederik
>>>>
>>>>For the record: I never optimize; I usually take Fibonacci numbers.
>>>>
>>>
>>>
>>>
>>
>>
>>
>>
>>
>
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