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This is the second of two emails that Neal Weintraub sent me in answer to
questions that I posed recently.
Unless this thread has new CONTENT, I'm done with this now.
If only I figure out how to get down from the very large soapbox (I can't
figure out how) I got up on.....
Steven Buss
Walnut Creek, CA
sbuss@xxxxxxxxxxx
"There's nothing more practical than good theory."
-----Original Message-----
From: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
To: Steven Buss <sbuss@xxxxxxxxxxx>
Date: Tuesday, July 28, 1998 8:13 PM
Subject: Re: Weintraub on Backtesting Questions
>I also suggest you contact the department of statistics at the university
of
>your choice on the virtue of back testing and its reliability.
>-----Original Message-----
>From: Steven Buss <sbuss@xxxxxxxxxxx>
>To: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
>Cc: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
>Date: Tuesday, July 28, 1998 9:04 AM
>Subject: Re: Weintraub on Backtesting Questions
>
>
>Comments inserted below.
>
>-----Original Message-----
>From: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
>To: Steven Buss <sbuss@xxxxxxxxxxx>
>Date: Tuesday, July 28, 1998 7:47 AM
>Subject: Re: Weintraub on Backtesting Questions
>
>
>>Steve
>>I will give Grant a call this evening and talk about this.
>
>
>I'd love to hear more about what Grant says about preparing seriously to
>trade the markets.
>
>>Back testing for futures is interesting and academic and may give you an
>>indication but that is about it. It is not the Holy Grail.
>
>
>An "indication" of what?
>
>So, your knowledge that backtesting provides interesting results that
>provide little value other than academic knowledge is based on what....?
>I'm looking for phrases like, "take a look at this book..." or "you know
S&C
>published this article not long ago..."
>
>I'd even settle for a "You know, I have access to a proprietary study done
>by xyz trading company and they found...."
>
>No one on this list has used the word "Holy Grail" to describe the value of
>backtesting that I know of so I don't know whose view you are arguing
>against here.
>
>>Back testing is like predicting the weather based on every July 29th for
>the
>>past twenty years.
>
>And, your knowledge that backtesting provides as little predictive value of
>the worth of a trading system as a prediction of the "weather on every July
>29th for the past twenty years" is based on what?
>
>>I spent six months doing consulting for Omega. I was in every nook.
>
>And, the "six months doing consulting for Omega" and the fact that you were
>"in every nook" (whatever that means) provided you with what specific
>information that has relevance to the issue of whether backtesting provides
>value?
>
>> Let
>>Omega trade a system
>
>And, whether or not "Omega" could trade a system has what specific
relevance
>to the issue of whether backtesting provides value or not?
>
>> After all even Boeing tests its own aircraft.
>
>And, whether or not Boeing tests its own aircraft has what specific
>relevance to the issue of whether backtesting provides value or not?
>
>>the
>>market will do what ever it takes to fool the most number of people. With
>>all these back testers why are most people net losers?
>
>
>So, what specific knowledge do you have about the relationship of the
number
>of folks who have done serious trading system backtesting to the number of
>people who are net losers?
>
>>I know let,s back test that too!
>
>
>By positioning yourself as a kind of "expert" on the markets (I'd be happy
>to expound on the ways that you've done that if you like) it seems to me
>that you'd want to substantiate the opinions that will appear in your book
>and that you publish to the list or to its ftp site.
>
>IMO, the attempt at levity here does nothing to negate the fact that your
>note doesn't substantiate your view that backtesting provides little value.
>
>I know that there are alot of folks who are members of this list (including
>myself) who are sincerely and extremely interested in the backtesting value
>question. If I may be so bold as to speak for some of these folks for a
>moment, we just want to know whether there is substance to your views on
>backtesting or whether you're just being chatty when you express them.
>
>Steven Buss
>Who only wishes he had more expertise in backtesting trading systems
>
>>-----Original Message-----
>>From: Steven Buss <sbuss@xxxxxxxxxxx>
>>To: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
>>Cc: Omega List <Omega-list@xxxxxxxxxx>
>>Date: Tuesday, July 28, 1998 5:10 AM
>>Subject: Weintraub on Backtesting Questions
>>
>>
>>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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