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Sorry...wrong list, apologies
>Yeah, Rich, I remember it well because Bob was responding to my post
>regarding real time trading results verses long system backtests. I still
>agree / disagree on the relevance of backtests to real time system
>performance. Can anyone produce a backtested system that has comparable
>real time trading results? I stll believe that there will be a divergence
>between the two with time if no further tweaking is done to the system.
>Comments?
>
>Bob Brickey's post is reproduced below.
>
>-Tony Haas
>
>>Resent-Date: Wed, 25 Feb 1998 13:21:28 -0800 (PST)
>>To: Omega Mailing List <omega-list@xxxxxxxxxxxxxxx>
>>Subject: Statistical Significance
>>Date: Wed, 25 Feb 98 14:19:44 -0500
>>From: Scientific Approaches <sci@xxxxxxxxxx>
>>X-Mailer: E-Mail Connection v2.5.03
>>Resent-From: omega-list@xxxxxxxxxx
>>X-Mailing-List: <omega-list@xxxxxxxxxx> archive/latest/14872
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>>
>>Someone wrote:
>>
>>> What my rules / guidelines / suggestions try to do is
>>> simply weed out the dishonest or even sloppy system vendors
>>> by requiring documented real time performance results...<SNIP>
>>
>>Good real-time results tend to give us all a warm fuzzy feeling. However,
>>contrary to the belief of most traders, real-time trading results often mean
>>very little. They don't mean much, unless there have been enough trades to
>>have statistical significance.
>>
>>The number of trades required for statistical significance is a complicated
>>issue in a game like trading. It depends both on the percentage of
>>profitable trades during a test period and the ratio of the average amount
>>won to the average amount lost per trade.
>>
>>The result of 100 real-time trades generally means almost nothing, given
>>typical win to loss and win-amount to loss-amount ratios. The result of 1,
>>000 real-time trades under the same conditions typically has a little
>>significance, but not nearly as much as most traders would think. A mere 1,
>>000 trades can be very misleading. From a scientific perspective about all
>>that could be said is that the result is interesting and probably warrants
>>further study. The result of 10,000 trades typically is significant enough
>>that it can be said there is a degree of scientific evidence, but even that
>>number can be misleading.
>>
>>The problem with the "I won't trade a system without real-time trading
>>proof" philosophy is it is practically impossible for statistically
>>significant real-time results to exist. A trading method that has been
>>found profitable in a back-test over 10,000 trades is statistically much
>>more likely to work into the future than a system that happened to be
>>profitable over a mere 100 trades in real-time, regardless of what most
>>traders might think.
>>
>>Anyone who is going to limit their trading methods to systems proven to work
>>in real-time must consider only systems that were developed a very long time
>>ago and that have been traded consistently without modification since. They
>>are not easy to find.
>>
>> -Bob Brickey
>> Scientific Approaches
>> sci@xxxxxxxxxx
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