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Rick:
Right on.
Optimization is a variant of curve fitting. Curve fitting has been used for
a very long time to analyze data. One of the caveats of curve fitting is
that you don't use the fitted curve for conditions that are beyond the range
of data.
Lionel Issen
lissen@xxxxxxxxxxxxxx
----- Original Message -----
From: "Rick Parsons" <RickParsons@xxxxxxxxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Friday, June 08, 2001 8:33 AM
Subject: RE: QQQ System Test Optimizations
> You have to be very careful with optimized systems. They can look great
on
> paper but many tend to fail once real trading starts. Analyze each trade
> closely. Is there only one or two trades with tremendous gains while
there
> are many trades with many small losses? You need to see consistent
profits
> thru out the entire testing periods. Another thing to look for is
> robustness. For example, if you optimize a system which uses a moving
> average and the best returns are for a 14 day moving average, check to see
> if you still get decent returns with a 9, 10, 11, 12, 13, 15, 16, 17 day
> moving average. If you still get decent returns that is a good sign. If
> the system falls apart when you try a 13 day moving average for example,
> then it is not very robust. You also need to look at the maximum number
of
> losses in a row. For example it the maximum losses in a row is five,
could
> you have stuck with the system had you started trading just as the first
> loss happened? Same with maximum drawdowns. Even though the system
> returned 100% on average, could you have stuck with the system if it had a
> drawdown of 40%? Although this is mechanical investing, very few can
> suppress their emotions when real money is involved. A lot of second
> guessing goes on. Moral: optimized systems are not the holy grail you
> think they will be.
>
> Rick
>
>
> -----Original Message-----
> From: owner-metastock@xxxxxxxxxxxxx
> [mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of Herman van den Bergen
> Sent: Monday, May 27, 2002 8:37 AM
> To: metastock@xxxxxxxxxxxxx
> Subject: Re: QQQ System Test
>
>
> At 03:45 PM 5/25/01 -0700, you wrote:
> >>... Just curious how this compares with other systems
> >> trading QQQ.
> >
> >first you need to only include your out-of-sample
> >performance. Good would be 100% / year. Above means
> >nothing.
>
> Hi Jack and other readers,
>
> Sounds like you have some experience in this area - would you care to
share
> some?
>
> When I run a System test on the QQQ, say for the period 11/3/99 -
11/24/00,
> I get a long list of results. One for each opt combination. In my case I
> get 164 results that give me >100%.
>
> Judging by the percentage gain a large number of those "winners" work just
> fine on out-of-sample data for the period 11/24/00 to today.
>
> How do I select the best system from many "good" performers, I mean
> something better than just looking at the linearity of the equity charts?
>
> Are there other ways to rate/test a system for future performance?
>
> Thanks for any comments you may have,
> Herman.
>
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