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Hi MG Ferreira:
As we go this far for Kalman Filter, I am sincerely appreciated
your help and suggestion. Kalman Filter is a very good approach on
managing indicators. I would like to learn more about this subject,
do you have any recommendation on any materials? so I can explore
more about managing practices.
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> a weight of 3% means in effect that that
> indicator has been discarded from the system. So you do not really
> have to worry about physically taking it out - it is out in
> practise!
The indicator with 3% weight has been discarded from the system
without physically taking it out. My concern is that if this
indicator measures the short term momentum, and there is no similar
indicator performing this task within the pool, then the pool of
indicators will be less diversified temporarily. If I add another
similar indicator for short term momentum without replacing the poor
performance one (3%), then once the poor one recovers on its
performance, there will be redundant on information for short term
momentum, which causes a problem. If the poor performance indicator
is replaced by a better one, then it causes an inconsistency in
trading strategy. What should I doooooo? :<
> I'd be hesitant to change a system too much based on hindsight.
> I am sure superf can write many comments on such an approach!
This managing issue is struggling between diversified indicators and
consistent indicators. I hope superf or anyone can join our
discussion.
Thank you very much
Eric :>
--- In equismetastock@xxxxxxxxxxxxxxx, mgf_za_1999 <no_reply@xxxx>
wrote:
> Hi Eric,
>
> I am glad you are smiling again!
>
> In terms of the ratio between the weights. PC will not influence
it a
> lot and SM will only influence it in the shorter term. Since the
> weights adjust themselves, a weight of 3% means in effect that that
> indicator has been discarded from the system. So you do not really
> have to worry about physically taking it out - it is out in
practise!
>
> Also, I'd be hesitant to change a system too much based on
hindsight.
> I am sure superf can write many comments on such an approach! You
> can now think of adding more indicators to the system. Maybe also
> change the range on PC from 0-100 to 0-200 or even 0-500 and play
> around with some of the bigger numbers, say 200. But there is not
too
> much in there - the next step is to have individual PC and SM
values,
> but the complexity it adds I think outweigh the benefit it
delivers.
> By the way, I think the system now resembles a neural network to
some
> extent.
>
> Since weights are adjusted dynamically they will change over time.
> This is good and it fades different indicators in and out as they
> deliver or fail to deliver performance. The only thing that can
> happen, and probably will happen a lot, is that a particular
indicator
> be faded out completely (like 3% weight). It is also common to
have a
> lot of indicators fade out and just one or two dominant ones remain.
>
> We sometimes force indicators to remain present in a system even if
> they don't work. You sometimes want to retain an indicator to keep
> the system from being overoptimised even if it does not seem to add
> value. This depends on the optimisation process too, so I am not
sure
> how it would apply here. Again, we are *not* optimising since we
> adjust weights on observed performance and we are not iterating over
> the whole sample. To do this you need the individual PC and SM
> variables, so I am not sure we really want to go that far here.
>
> Anyhow, keep us informed of the system's developments.
>
> Regards
> MG Ferreira
> TsaTsa EOD Programmer and trading model builder
> http://www.ferra4models.com
> http://fun.ferra4models.com
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