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What
do you mean by 'preform'?
If you
have 'conditions' in your trading system, then that is
optimisation.
If you
use timeframe as a variable then that is optimisation.
If you
use past profit performance in some way then this is definitely
optimisation.
<SPAN
class=453322500-01082004>
As
previously stated no one on the planet can create a trading model that does not
involve optimisation.
<SPAN
class=453322500-01082004>
Is
optimisation a bad thing? No...It is a process used to discover how the
markets works. A successful model MUST
<SPAN
class=453322500-01082004>replicate the market characteristics or changing
characteristics to be valid.
<SPAN
class=453322500-01082004>
Most
model designers use data mining. To correctly use optimisation takes many
years of experience in reading
and
trading markets, along with the ability to accurately convert that model into
code. Very few people have this capability.
<SPAN
class=453322500-01082004>
<SPAN
class=453322500-01082004>Regards,
<SPAN
class=453322500-01082004>Adrian
<BLOCKQUOTE
>
<FONT
face=Tahoma size=2>-----Original Message-----From: rhrobin@xxxxxxxx
[mailto:rhrobin@xxxxxxxx] Sent: Sunday, 1 August 2004 5:08
AMTo: Metastockusers@xxxxxxxxxxxxxxxSubject: Re: RE:
[Metastockusers] Re: Trading System
PresentationOptimistion is to use the optimal value
(Fitting) the MEANS of the test is not optimistion, it is the true variable.
You can build trading systems without optimistion, Condition do not require
variable and I have a system that has no variable to over fit nor under fit
because it is preformance driven, if stock do not preform they are not traded.
Time frame can also be fitted but with my system the final output will be
based on total preformance under the conditions set.> >
From: "Adrian Pitt" <apitt@xxxxxxxxxxxxx>> Date: 2004/07/31 Sat
AM 01:23:48 EDT> To: <Metastockusers@xxxxxxxxxxxxxxx>>
Subject: RE: [Metastockusers] Re: Trading System Presentation> >
So Jose,> > Going by your comments, you seem to define
optimisation as the process> of introducing a variable where you have
to select a number from a range> of numbers. Some people suggest that
by using price patterns instead> that they aren't optimising, but we
both know this to be wrong as well.> So my question is Jose, how do you
go about designing a system without> using optimisation at one point or
another? And just picking a number> for a variable and saying you
didn't optimise it doesn't mean that at> all...it merely says you
randomly chose a number and then stuck your> head in the sand hoping it
would work. Your email says to "identify a> characteristic within
the data".. How does one do that without some> level of data
mining..i.e optimisation? > > Bottom line, regardless of
what anyone on the planet thinks, every> single model and strategy has
been optimised. And that includes buy and> hold. People
have done endless research to show that buy and hold 'has'> been an
effective strategy for the market as a whole. In other words> they
optimised the strategy process, even though there are basically> ZERO
variables. Ultimately to arrive at a model that in some way>
accurately reflects how the markets work requires optimisation..end of>
story, and no one can prove otherwise. There is a subtle line
though> between optimising and data mining. Data mining is simply
the scanning> of data for patterns, random of otherwise until you find
something that> happens to do well. This is highly likely to be
just a random> occurrence though unless you have some way of showing it
not to be> random. > > So back to you Jose.
IF you don't do any curve fitting or optimisation,> how do you go about
designing a trading model and finding a> characteristic 'within the
data'?> > Regards,> Adrian> >
-----Original Message-----> From: Jose [mailto:josesilva22@xxxxxxxxx]
> Sent: Saturday, 31 July 2004 3:28 AM> To:
Metastockusers@xxxxxxxxxxxxxxx> Subject: [Metastockusers] Re: Trading
System Presentation> > > > 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 '-)> <A
href="">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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