|
PureBytes Links
Trading Reference Links
|
Very helpful reply. Your advice is to scrap my 10 favorite stocks
and let the system(s) pick the universe of stocks to trade.
One clarification: can you expound on "Orderly accumulation and
distribution is the "key" to increased profits."
Thanks!
--- In equismetastock@xxxxxxxxxxxxxxx, "CedarCreekTrading"
<kernish@xxxx> wrote:
> Yes, you have no bananas. Nothing works on predetermined issues,
all of the time. The single largest trap any mechanical trader falls
into: forcing technical work on specific markets.
>
> Mechanical systems can be divided into two types (in general, cut
me a little slack here): trend following/breakout or contra-trend
momentum systems. Overall market conditions dictate which of
the "type" of system you should put in play.
>
> We believe one keys is volatility. I publicly trade a mechanical
system and this successful approach has been criticized for not
performing well during certain six-month periods during the past ten
years (but, certainly not any time this year). Examining the poor-
performing periods led us to believe that momentum oscillator (RSI,
StoRSI, etc.) driven systems kick butt in times of low volatility.
Unfortunately, they do not fare as well when rate of change becomes
relatively large. Trend following systems get killed in low
volatility and "bring home the bacon" when volatility is pushing
historic highs.
>
> So, first, you have to measure volatility and understand the pulse
of the market....applying the type of approach that suits the
conditions. Then, the fun begins. Traders tend to pick their
universe and then "force fit" mechanical systems on their favorite
issues. Total nonsense. Flawed logic.
>
> Allow your system to select the universe. Some issues have supply
and demand patterns that will never lend themselves to profitable
mechanical extraction. Orderly accumulation and distribution is
the "key" to increased profits. Why trade issues that lose money?
Hopefully, the answer isn't: because it's one of my favorites. I
wonder if your favorite issues love you as much as you love them?
>
> Once you identify issues that have a history of "orderly" supply
and demand, you can rank your opportunities by a bevy of
measurements: expectancy, % per day return, etc.
>
> Don't fall into the trap of trying to make credible approaches work
on your "favorites". Good luck.
>
> Take care,
>
> Steve
> www.cedarcreektrading.com
> www.thedailytrade.com
>
>
>
> ----- Original Message -----
> From: metastkuser
> To: equismetastock@xxxxxxxxxxxxxxx
> Sent: Tuesday, October 19, 2004 10:17 PM
> Subject: [EquisMetaStock Group] Re: System Tester, Number of Bars
>
>
>
>
> Well I had no idea my question would spur such a debate. After
> reading opposing viewpoints, here is what I have converged to:
>
> I am trying to find the best systems with which to trade my 10
> favorite stocks. I have about 50 systems at my disposal. I have
> decided to backtest each stock (against all systems) with 5000
bars,
> 1000 bars (which excludes the dot com bubble years) and 250 bars.
> Then, for each security, I will choose a system that performs
well
> over all three time periods.
>
> So do I have an ice cubes chance in hell?
>
>
>
>
>
> --- In equismetastock@xxxxxxxxxxxxxxx, "David" <junk@xxxx> wrote:
> >
> >
> > While I do respect your opinion on the matter that more
> > isn't "necessarily" better given changes in market conditions
from
> > the past. My view lies more in the fact that if you can design
a
> > system not only to perform well in past market conditions, but
also
> > in the dramatic recent changes, your system is obviously more
> > robust. And I'm not talking about a system that performs well
in
> the
> > past "on average." I mean consistent gains yearly as much is
> > possible. I would much rather have a system that performs just
as
> > well in the past as it is still doing recently, than having a
> system
> > that performs well recently but not in the past. In that
aspect I
> > believe more is better.
> >
> > But maybe my motives are different. I look for robust systems
that
> > can be applied to various securities for diversity and perform
> > consistently. I'm not looking for max possibly return. If a
> > businesss is to be run, you can't expect to have occasional
> > profitable results showing up here and there just when they
feel
> like
> > it. If your system can only do well in today's market but not
a
> > decade old market, who's to say that history won't repeat
itself
> and
> > the market reverts to old? Not to say you can't adjust your
system
> > when the time comes, but you cannot pinpoint that until
possibly
> > years too late.
> >
> > You said that the number of bars used has very little influence
on
> > curve fitting. In the most ridiculous of examples, if you have
> only
> > one month of data and go test a basket of systems, you will
> obviously
> > come up with a few that bought and sold at the exactly the
right
> > point. Not necessarily because they are good systems. So
what's
> > next? You can't have one month of data represent a whole year
of
> > market movememt, it's not accurate enough of the whole. What
about
> a
> > year? That sounds like a decent amount, but it only represents
10%
> > of a decade worth of data. Just as a month is only roughly 10%
of
> a
> > years worth of data and thats not accurate enough, then how
should
> > one year be enough when it's only 10% representative of the
market
> > conditions over the past decade? Maybe, that then lies more in
the
> > time frames you plan to choose. If your trade time frame with
the
> > designed system is short, then superfragalist may be right,
more is
> > not necessarily better. The short time frame expected to trade
> might
> > be close enough to the previous short tested time, then you
might
> > make money with the system you designed for it. But I wouldn't
be
> > willing chance my money on it. So even aside from the possible
> curve
> > fitting issue, I still would find the lack of bars to be a
negative
> > obstacle given that your system wouldn't have had time
to "prove"
> > itself in more varying market conditions. As I said, I respect
> your
> > view superfragalist, but the aforementioned reasons is why I
> believe
> > otherwise. But after writing this, I guess a lot boils down to
> > personal objectives and trading style.
> >
> > Best Regards,
> > David
> >
> > --- In equismetastock@xxxxxxxxxxxxxxx, superfragalist
> <no_reply@xxxx>
> > wrote:
> > >
> > > Sorry, but I don't agree with this statement. "I'm sure
everyone
> > > would more than emphatically agree with me that the more
> historical
> > > bars the better to test on."
> > >
> > > While I do agree that using too little data can be a problem,
too
> > > much data is just a big an issue. Curve fit is a complex
issue
> and
> > > the number of bars of data you use to develop your system has
> very
> > > little influence on it.
> > >
> > > I'm not going to go into a long piece on curve fit because
there
> > are
> > > many really good systems development books and internet
articles
> > that
> > > define, explain and debate the issue.
> > >
> > > Curve fit is easy to test for using out of sample data in
walk
> > > forward tests. Indicators can be tested for robustness prior
to
> > walk
> > > forward testing.
> > >
> > > Curve fit is caused by over optimization, lack of robustness
in
> the
> > > indicators, too many variables in the optimized equation and
poor
> > > selection of variables within the equation.
> > >
> > > Not one of the systems development books that explore the
issue
> of
> > > curve fit have a set number of bars of data that should be
tested
> > to
> > > reduce curve fit or to validate equations.
> > >
> > > No one says that 500 bars are too few and 2000 bars are too
many.
> > > Everyone has a different view. However, most authors and
systems
> > > develop people do agree on what causes curve fit.
> > >
> > > Robert Colby in The Encyclopedia of Technical Market
Indicators
> > often
> > > tests using 20 to 40 years worth of data. Does that mean that
the
> > > best performing systems he has found historically will work
well
> > > today. Absolutely not. He admits that many of the
historcially
> best
> > > performing systems have done poorly in the last few years. Is
it
> > > because of curve fit? No, it's because his historical data
> averages
> > > out all types of market cycles and the last few years have
been
> > > anything but average. The point of his book is not to use
what's
> > been
> > > great over forty years, but to look in similar places for
current
> > > versions of the similar things that will work in these
markets.
> > >
> > > Sorry I can't support your opinion. I've gotten a different
> > > perspective from studying the issue.
> > >
> > > Esignal is slowly increasing the amount of historical data
they
> > > maintain because of intraday system's developers requests for
the
> > > data. However, there has been talk that the historical data
will
> > not
> > > be available to users of MS but only to Esignal trading
clients.
> > > Equis says this is not true, but I've seen some evidence of
it.
> > >
> > > Historical one minute data since 1997 on the S&P 500 can be
> > purchased
> > > for about $2500 from Price-data.com. For people doing
intraday
> > > trading that's reasonably priced. You can buy individual
symbols
> > for
> > > $75.
>
>
>
>
>
>
>
> Yahoo! Groups Sponsor
> ADVERTISEMENT
>
>
>
>
>
> --------------------------------------------------------------------
----------
> Yahoo! Groups Links
>
> a.. To visit your group on the web, go to:
> http://groups.yahoo.com/group/equismetastock/
>
> b.. To unsubscribe from this group, send an email to:
> equismetastock-unsubscribe@xxxxxxxxxxxxxxx
>
> c.. Your use of Yahoo! Groups is subject to the Yahoo! Terms of
Service.
------------------------ Yahoo! Groups Sponsor --------------------~-->
$9.95 domain names from Yahoo!. Register anything.
http://us.click.yahoo.com/J8kdrA/y20IAA/yQLSAA/BefplB/TM
--------------------------------------------------------------------~->
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/equismetastock/
<*> To unsubscribe from this group, send an email to:
equismetastock-unsubscribe@xxxxxxxxxxxxxxx
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
|