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Having coded & backtested 000's of trading ideas for paying clients
over the last five years, these are my personal comments based on my
experience:
"Identify a characteristic within the data."
"Pick a trading time frame."
"Test entry ideas."
"After finding a good entry, test exits."
"Add filters to improve the system performance."
"Test money management rules."
"Complete out-of-sample testing."
Reasonably good system development ideas.
"Optimize the entry signal across as many commodities as possible."
Curve-fitting.
"He defines curve fitting as either the overuse of rules, filters, or
stops when developing a trading system on a sufficient amount of past
data;"
Not so.
One can curve-fit system results with just one simple set of entry &
exit rules, on any amount of past data.
Curve-fitting is simply tailoring (mostly illogical) system rules to
fit past results. Often these rules manage to (mostly by coincidence)
capture one or two large price swings, enough to make a final
difference to test results.
"He is confident that if he can get enough trades then total profit is
the only meaningful statistic to prove that a system works."
Pfff...
Buy & Hold fits this description exactly, yet drawdowns and lack of
sufficient profit generated over time make this strategy totally
unsuitable to most active traders with limited funds.
Nevertheless, perhaps Mr Fitschen's presentation is worth listening
to. Has anyone been to any?
jose '-)
http://users.bigpond.com/prominex/pegasus.htm
--- In Metastockusers@xxxxxxxxxxxxxxx, "luigilms_2000"
<luigilms_2000@xxxx> wrote:
> This is an announcement of a free presentation by Keith Fitschen,
> the developer of the Aberration Trading System, in regard to
> developing trading systems and the pitfalls involved. I'm confident
> that they will learn valuable information in regard to system
> development. Below are the details:
>
> SATURDAY, AUGUST 7, 2004, FROM 10AM - 2PM, DOUBLETREE HOTEL OHARE
> AIRPORT, 5460 NORTH RIVER ROAD, ROSEMONT, IL. (847)- 292-9100
>
> SATURDAY, AUGUST 21, 2004, FROM 10AM – 2PM, HYATT SAN JOSE AIRPORT
> 1740 North First Street, San Jose, CA. 95112,(408)- 993-1234
>
> Important Seminar Information,(Note: All pre-registered attendees
> will receive a free trading system, $500 value,RSVP to
> Leonard@xxxx or call 800-858-2340.
>
> Trading System Development Outline
>
> Keith Fitschen presents a detailed study on the theory of system
> development, an application of that theory in which he designed a
> profitable system, and an overview of his commercially available
> Aberration Trading System. Aberration is a multi-commodity trading
> system that was released in 1993. Futures Truth Magazine has twice
> named it "ONE OF THE TOP TEN TRADING SYSTEMS OF ALL TIME" (1997 and
> again in 2000). The speaker is sponsored by Angus Jackson, Inc.,
> (www.angusjackson.com), a futures and commodity brokerage firm based
> out of Fort Lauderdale since the mid-1980s. Angus Jackson Inc.
> specializes in executing various mechanical trading models for its
> clients.
>
>
>
> System development, as defined by Fitschen, is a process to identify
> a means of profitably exploiting noisy market data. Fitschen
> summarized the process as a series of steps:
>
> · Identify a characteristic within the data.
>
> · Pick a trading time frame.
>
> · Test entry ideas.
>
> · Optimize the entry signal across as many commodities as
> possible.
>
> · After finding a good entry, test exits.
>
> · Add filters to improve the system performance.
>
> · Test money management rules.
>
> · Complete out-of-sample testing.
>
>
>
> Curve fitting. The biggest pitfall to system development, in his
> opinion, is curvefitting, which over-optimizes past data to generate
> results that can't be achieved in real time trading. He defines
> curve fitting as either the overuse of rules, filters, or stops when
> developing a trading system on a sufficient amount of past data; or
> the proper application of rules, filters, or stops on an
> insufficient amount of past data.
>
> Demonstration. Turning from theory to application, Fitschen
> demonstrated the system development process. He followed the steps
> he had outlined earlier.
>
>
>
> Another Example. Donchian breakout entries are a well-known
> commodities trading technique. This system buys on a close higher
> than the highest close in the look back period and sells on a close
> lower than the lowest close in the look back period.
>
>
>
> Performance Metrics. The most important measure of a system to
> Fitschen is total profitability. He is confident that if he can get
> enough trades then total profit is the only meaningful statistic to
> prove that a system works. He also likes to look at the gain/pain
> ratio, which he defines as the average annual gain divided by the
> average annual drawdown.
>
>
>
> Guidelines for Buying and Trading a Mechanical System.
>
>
>
> Overview of Aberration Trading System.
>
>
>
>
>
> Keith Fitschen has developed commodity systems for the last 20
> years. He retired from the Air Force in 1988, and has been trading
> commodities since then. Aberration has been marketed since 1993.
> Keith has also developed Aztec, a shorter-term commodity system, and
> Imaster, a short-term index system. Additional information about his
> work can be found at www.trade-system.com.
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