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<DIV><FONT size=2>All,</FONT></DIV>
<DIV><FONT size=2> With Guy's change to a buy signal and
the strong market pop this morning, I took a long look at the charts. My
conclusion was that yesterday could have been a short term bottom.
Time will tell, but I decided to act like it was. I decided to not
close my CPU and Microsoft positions as required by yesterday's stop signal
since they had moved back into the channel. Also, their charts looked
like they were trying to make a short term bottom. NEON which I didn't get
a stop on yesterday opened down on no news that I could find. NETA which I
did get a stop signal on didn't look too bad, but AOL is now looking like a
better internet play. I decided to close my positions in both NEON
and NETA and replace them with a position in AOL.</FONT></DIV>
<DIV><FONT size=2> AOL looks like it may be trying to
bounce off the bottom of an Intermediate Term Up Trend Channel with its
strong open this morning. Both the StochRSI 13 and 55 look like they are
forming negative peaks which do indicate a turn up. Yesterday's close was
almost a 50% retracement from the April high. Adding it all up, this looks
to me like a good entry point. Hope I'm right <G>.</FONT></DIV>
<DIV><FONT size=2> I'll send yesterday's AOL.GIF chart
to everyone on the email list.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>JimG </FONT></DIV></BODY></HTML>
</x-html>From ???@??? Wed Jun 16 14:27:26 1999
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From: "rudolf stricker" <rst@xxxxxxxxxxx>
To: metastock@xxxxxxxxxxxxx
Subject: Re: "SystemTests": which optimization criterions are appropriate?
Date: Wed, 16 Jun 1999 21:52:17 +0200
Organization: tbus tech-consult & simulation, 80538 munich, germany
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Vitaly,
thank you for your ideas on system optimization.
On Mon, 14 Jun 1999 12:55:09 -0400, you wrote:
>After giving its (pretty long and disappointing) due to the idea of optimization of a trading
>system, I got convinced that an ultimate criterion for a good system is a "quality" of its
>equity line. Ideally, it should be trending up with minor retracements. If you consider as
>an example of a good (in fact, too good) system the one with 1/1 as #win/#loss ratio, and
>2/1 as the average ($) win/average($) loss ratio, you may see this kind of the equityline
>being produced. Certainly, unless you have nerves of steel and a sleep of baby, you may
>want to minimize drawdowns as well, or # of losses in a row. It would make the line even
>less susceptible to steep/long downs. To put it into a quantitative framework, one could
>use RSI applied to the equity line, and ask for a relatively high value as averaged over a
>test period, or any other, similar variations on the theme. Unfortunately, it may be hard to
>do in Metastock, since you will have to program the equity line calculation.
Because of the poor system design capabilities (pretty good arsenal of
modeling tools, but too much restrictions, like size of code, number
of variables, constants instead of variables, etc) and the missing
optimization capabilities in MetaStock, I do my "system tests" in
Excel with seemingly unlimited modeling and optimization power, even
if there are limitations in terms of speed ...
I tried your idea of modeling the trendiness of the equity line by
RSI, but this seems to be VERY sensitive (at least for my option
data), because the volatility of the price is reflected also during
INs. So, the win/loss ratio seems to be a good choice, when taken over
appropriate time intervals. These intervals also can be defined
overlapping e.g. to define an increasing "weight" towards the end of
the data (i.e. "now"), which may enhance the "generalization" or
"extrapolation" capabilities of the optimized model.
BTW: Taking into account more and more features of the equity line
(e.g. the ## of wins/losses you recommended) during the optimization
process tends to lead to "optimization surfaces" with several local
optima. So the optimization method must be selected appropriately to
handle these "complicated" type of models, and exploration of the
_absolute_ maximum often is not a simple task.
mfg rudolf stricker
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