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Could you please explain a little bit more about optimising per
ticker or across? - if across, you can bundle all the trades together.
I don't understand what ticker and across mean.
Thank you
Eric :>
--- In equismetastock@xxxxxxxxxxxxxxx, mgf_za_1999 <no_reply@xxxx>
wrote:
> I would optimise and evaluate per individual ticker, so then you
still
> need 30 + degrees of freedom + some more, just to be sure trades.
If
> you test the system across different tickers, then it depends on how
> you optimise. Do you optimise per ticker or across - if across, you
> can bundle all the trades together.
>
> Regards
> MG Ferreira
> TsaTsa EOD Programmer and trading model builder
> http://www.ferra4models.com
> http://fun.ferra4models.com
>
>
> --- In equismetastock@xxxxxxxxxxxxxxx, "Gabriel Pellegrini"
> <gabrielpellegrini@xxxx> wrote:
> > The sample has 74 markets and 3000 trades.
> > ----- Original Message -----
> > From: "mgf_za_1999" <no_reply@xxxxxxxxxxxxxxx>
> > To: <equismetastock@xxxxxxxxxxxxxxx>
> > Sent: Monday, September 05, 2005 4:31 PM
> > Subject: [EquisMetaStock Group] Re: How many trades does the
> evaluation need
> > to be sound statistically?
> >
> >
> > > If your system trades 9 times in 20 years, either give the
money to
> > > some index manager, or put it in the bank. You are not
trading, you
> > > are buying and holding or investing. If you add any conceivable
> > > gearing then either you will run out of margin, or pay through
your
> > > ears in carry over the 20 years with just 9 trades.
> > >
> > > Anyhow, 9 trades in 20 years sounds academic to me - 30 trades
plus
> > > degrees of freedom sounds practical to me.
> > >
> > > I do use such long term, 9-trades-in-20-years systems to
extract the
> > > long term trend from a ticker. But I do not use that as a
trading
> > > decision - just as part of the input.
> > >
> > > Yes I agree with you, trading is not investing. But I
certainly don't
> > > think trading is gambling. It is gambling if you don't know
what you
> > > are doing, probably with much worse odds than you'd get in a
gambling
> > > house. Trading is buying and selling of financial instruments
with a
> > > view to making a speculative profit while gambling is
statistical and,
> > > given the odds, a sin!
> > >
> > > Regards
> > > MG Ferreira
> > > TsaTsa EOD Programmer and trading model builder
> > > http://www.ferra4models.com
> > > http://fun.ferra4models.com
> > >
> > > --- In equismetastock@xxxxxxxxxxxxxxx, superfragalist
<no_reply@xxxx>
> > > wrote:
> > >> Your premise is from a purely mathematical view, specifically
> > >> statistical. However, the market doesn't always supply data in
a
> > >> complete packages ready for statistical testing and inference.
> > >>
> > >> Suppose we have a market timing system that has made only 9
trades in
> > >> the last 20 years and all of the trades have been highly
profitable.
> > >> Do we use the system or not? There are not enough trades to
validate
> > >> the results.
> > >>
> > >> We can wait another 40 years or so and we'll probably have
enough
> data
> > >> and enough trades to make statistically meaningful inferences.
> > >>
> > >> None of this is neat, precise or absolute. And there are no
hard and
> > >> fast rules for how many trades a system needs to give good test
> > >> results. There are approaches which are better than others
like this
> > >> one by MG, but there is no one correct answer to the question.
> > >>
> > >> After many millions of systems tests and a lot of trading years
> in the
> > >> markets, no one has come with a trading system, a timing system
> or any
> > >> other system that works consistently over long periods of
market
> > > history.
> > >>
> > >> Trading is not investing, it's gambling with an edge to the
player if
> > >> the player is an expert at that game. However, the house is
always
> > >> changing a little something here or there that changes the
> > >> probabilities of events just enough to change the game. It's
the
> > >> players job to stay up with these changes and adapt well
enough to
> > >> keep the edge on the house.
> > >>
> > >> Newbie's just don't get how long it takes and how hard it is
to get
> > >> the edge consistently and over long periods of time. A newbie
thinks
> > >> if they make money one year, they're going to be a successful
trader
> > >> every year. Call me in twenty years with your track record and
if it
> > >> measures up, I'll send you your certificate of validation.
> > >>
> > >>
> > >>
> > >>
> > >>
> > >>
> > >>
> > >>
> > >> --- In equismetastock@xxxxxxxxxxxxxxx, mgf_za_1999
<no_reply@xxxx>
> > > wrote:
> > >> > The 30 trades is based on the central limit theorem - after
> about 30
> > >> > observations things settle down if the mean of random samples
> follows
> > >> > a normal distribution. There are several assumptions in this
> > >> > approach, but it should give a good idea. I'd push it up a
> bit, say
> > >> > to 35 or 40. Also, you need to adjust for degrees of freedom
> if you
> > >> > do any optimisation. Suppose your system is driven by 1
parameter,
> > >> > then you must add this to the 30. Suppose you have a big
> system that
> > >> > uses say 10 parametrs - then you need at least 40 trades.
> Especially
> > >> > if the system gets bigger, it needs more trades to give any
> > >> > confidence, and I will feel better if such a system produced
good
> > >> > results in 50 or more trades.
> > >> >
> > >> > Another, excellent way to test is to use a hold out sample.
> Build the
> > >> > system on a portion of the data, say an 80% sample. Then
test
> it on
> > >> > the rest and you can see if you have a winner or fools
gold. The
> > >> > *proper* way to do this is to segment the sample in say 10
> blocks (of
> > >> > 10% of the data each). Now you choose randomly any 8 blocks,
> optimise
> > >> > the parameters of the system on it, and test it on the
remaining 2.
> > >> > Then you choose another 8 blocks randomly, optimise the
system,
> test
> > >> > it on the remaining 2 and so on. After you've done this say
100
> > >> > times, you test the results.
> > >> >
> > >> > For this you need special software - one good example can be
> found at
> > >> >
> > >> > http://weka.sf.net
> > >> >
> > >> > In practise, just chop off the most recent 20% and you'd get
a good
> > >> > idea if the system will work or not.
> > >> >
> > >> > Regards
> > >> > MG Ferreira
> > >> > TsaTsa EOD Programmer and trading model builder
> > >> > http://www.ferra4models.com
> > >> > http://fun.ferra4models.com
> > >> >
> > >> >
> > >> > --- In equismetastock@xxxxxxxxxxxxxxx, "rvalue1"
<rvalue1@xxxx>
> wrote:
> > >> > > I would contend that if you generated >30 trades in the up
> > > direction
> > >> > > for a sufficiently long period 2 years or so, you would
have
> > >> > > confidence that the system does well in the up direction.
> Same for
> > >> > > down and catch the sideways as it transitions. Very
unusual to
> > > find
> > >> > > a great system up, down and sideways!! If you have one,
let me
> > > know.
> > >> > >
> > >> > > If you are waiting for 1000 trades, you must trade very
often.
> > >> > >
> > >> > > --- In equismetastock@xxxxxxxxxxxxxxx, "Ed Hoopes"
> > >> > > <reefbreak_sd@xxxx> wrote:
> > >> > > > I recently attended a lecture by Keith Fitchen, the
author of
> > >> > > several
> > >> > > > successful trading systems most notably Aberration. He
> says that
> > >> > > > statistics on more than 1000 trades must be compiled
before the
> > >> > > > results can be considered valid.
> > >> > > >
> > >> > > > Ed Hoopes
> > >> > > >
> > >> > > > --- In equismetastock@xxxxxxxxxxxxxxx, chichungchoi
> > > <no_reply@xxxx>
> > >> > > wrote:
> > >> > > > > Does anyone know how many trades the evaluation needs
to be
> > > sound
> > >> > > > > statistically?
> > >> > > > > Thank you in advance
> > >> > > > > Eric
> > >
> > >
> > >
> > >
> > >
> > >
> > > Yahoo! Groups Links
> > >
> > >
> > >
> > >
> > >
> > >
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