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Rudoff,
Let me ask you this: Have you or anyone ever found an optimized system that
has worked in every market over the course of years? (The Holy Grail) How
many really manage to follow an optimized system over a long period of time
and ended up with a return that beats the market averages?
I am sure there may be a few but I bet over 90% of all who have tried have
given up their system at some point due to excessive drawdown, losses or
emotional second guessing.
I often see advertisements in magazines or on the net for "optimized" or
"curve fitted" systems that supposedly give wonderful returns. Then I look
at the testimonials. Almost all testimonials are people who tried the
system and were one of the few lucky ones to make money in their first few
trades. They then rave about the system. But I have never seen a
testimonial where a user says "I have been trading this system for 12 months
(or more) and have consistently made money every single month for year or
more.
Often I will email the owners of the "system" and ask them if I can contact
some of their customers or if they have any chat rooms where the system is
discussed. Almost every time they will say "We cannot give out customer
names due to privacy concerns" and "We do not have a chat room". If they
say this it is because they don't want you to know that there are a lot of
unhappy customers out there. If the system was really that good, the best
way a company can get more customers is to let current customers rave about
the product in a chat room. But you don't see that. At least I haven't.
Perhaps someday someone will develop a system that does give consistent
market average beating returns year after year. Perhaps one exists right
now. I am open minded enough to know that anything is possible but I will
need to be able to verify the system by contacting customers who have proven
it works over a long period of time.
Rick
-----Original Message-----
From: owner-metastock@xxxxxxxxxxxxx
[mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of rudolf stricker
Sent: Friday, June 08, 2001 7:31 AM
To: metastock@xxxxxxxxxxxxx
Subject: Re: QQQ System Test Optimizations
On Fri, 8 Jun 2001 13:03:28 -0500, you wrote:
>Optimization is a variant of curve fitting.
This looks confusing to me...
Optimization is a process to select systematically a "best" set of
values for a given parametric model to meet some given goals. So its
not a bad thing at all, and I cannot understand this "optimization
bashing" going on here.
Moreover, _any_ TA work uses optimization, e.g. selecting an indicator
from several available _is_ optimization.
Most things criticized here in context with optimization do not deal
with optimization itself but rather with a "bad" parametric model
(e.g. robustness) or with an insufficient goal function (e.g. max
drawdown, number of loosing trades, etc).
>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.
Curve fitting is a fully accepted application area of general system
modeling (i.e. a combination of a parametric model, a goal function,
and an optimization procedure). And of coarse extrapolation can be a
dangerous thing, if the _parametric model_ does not cover e.g.
changes of the system behavior over time.
So, we should not blame system optimization for everything done badly
during parametric model and/or goal function setup.
mfg rudolf stricker
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