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Neil,
I'm trying to figure out what it is that you're saying about backtesting.
In your interview with Grant Noble, he says on p. 6.
"...You can have a good system but you don't trust it enough to follow every
signal. To get a system, you can trust and use, you must know its parameters
and strengths/weaknesses. In other words, you never are going to purchase a
"system" whose results year and year out are better than the average trend
following system. So you might as well design your own and stop frustrating
yourself."
And then you say:
"Well, the people advertising trading systems won't like to hear this. And
neither will people promoting back testing software packages."
Question:
What SPECIFICALLY is it that you believe Grant Noble said that back testing
software package vendors won't want to hear? I would think that it is
precisely system backtesting that would help to secure Mr. Noble's suggested
goal of "knowing...[a system's]...parameters and strengths/weakneses." I
don't see anything that he said that would justify the last statement that
you made. Your statement could imply that you believe software that may be
used for backtesting, like TS, is no more valuable than some "trading
system" software that can be purchased. Is this what you mean to imply? Do
you believe that backtesting a trading system doesn't provide value?
On the following page the exchange goes like this:
Grant: "The best advice is to read everything you can and practice before
you trade real money. "It's amazing how people will spend years of study and
thousands of dollars to become a lawyer or a doctor, but somehow they think
they can enter the high income profession of futures trader without doing a
bit or preparation…Again and again I have seen public traders lose tens of
thousands of dollars and be none the wiser after all their time and money.
They should have put that lost 10,000 into buying every futures book they
could find. All that time watching prices could have poured into a
self-directed 'college course' learning about the market. "(Pg.46, "The
Traders Edge"). Nothing is going to work until you have confidence it is
going to work and that takes time."
Neil: "So buying a piece of software won't cut it."
Grant: "Right."
Now again, your position, and Mr. Noble's, vis-a-vis trading system
backtesting is unclear. I would think that backtesting is a terrific means
of securing the objective Mr. Noble advocates of having confidence in a
trading system. But Mr. Noble just advocates "practice." Does "practice"
mean "paper trading"? I'm not clear that it could mean anything else
because when you state that buying software won't help (including
backtesting software like TS) Mr. Noble says "Right."
I believe that if you explained your views on system backtesting clearly and
in detail to the list you'd get alot of feedback, which is, I assume, your
purpose in posting the interview to the Omega list FTP site.
If, in fact, you don't believe backtesting a system, using software like TS,
provides value, it would be helpful if you could point to your own
experience with backtesting systems that led you to such a view or to other
materials upon which your view is based.
Steven Buss
Walnut Creek, CA
sbuss@xxxxxxxxxxx
"There's nothing more practical than good theory."
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