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Hi Dave,
I finally got back to your email ... hope you are still around :-) I find your post very interesting and have what are, undoubtedly, too many questions. Sorry that this appears a one way street: there isn't much I can contribute to this topic.
At 10:04 AM 7/3/01 -0700, you wrote: >...I start by looking at a certain market, and trying to break that up into pieces with different >character, e.g. trending, trading range, reversing, etc. So, if I'm trying to build a reversing >system using an oscillator(s), I'll want to select those segments of the market that are reversing >or trading in a range. Assuming I have enough bars, I can break those into segments for in and >out of sample testing...
Do I understand correctly that, given a long trend, you'll test the same trending period in segments? Do you use overlapping sample periods?
>Once I've found a successful approach to the specific character of that market, I can expand my >testing to a larger portion of the historical data, but I'll need to find a way to turn the system >on and off depending on what type of market behaviour is being exhibited. Then I'll run this >overall system against the larger data set, in much the same manner as you describe below.
How many types of market behavior do you recognize, do you consider patterns (i.e. head & shoulders) a market behavior? You mentioned Trend, trading range, reversal point, ... any others? Do you use exporations or other methods to classify the market?
>...A personal belief of mine is that market behavoiurs are persistent. The S&P is much more likely >to continue it's reversing behaviour in the future. I'm fairly confident that next month, it >won't become a trendy market.
I am intrigued by the idea of classifying stocks by their behavior. I tend to assign as much value to a system that works as to a system that doesn't work, they both carry an important message for us to decode.
Did you ever make an attempt to develop a classification system for stocks? I don't mean classifications by 'temporary' characteristics like trending, I mean more permanent, what appear like price-independent characteristics. An example would be a security's sensitivity to certain oscillators.
>A sidenote here is that I'm making certain assumptions about basic system design. I subscribe >heavily to the signal / trigger approach as well as Chuck LeBeau's methods for developing robust >systems. (www.traderclub.com) I really like adaptive rather than fixed approaches. Also, you'll >notice that markets look very different depending on the timeframe: comparing a 3 minute chart of >the S&P with a daily chart is a good example.
Chuck's bulletins are many ... I don't recall him referring specifically to robustness. Are you referring to his overall approach or to specific measures designed to measure and improve robustness?
When you say "adaptive" do you refer to a human or a formulae quality?
>Just some somewhat random ideas to go with your thoughts....
Thanks so much for your feedback, Herman.
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