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VBatla@xxxxxxx wrote:
> I've heard a lot about over optimization in system design. I also heard that
> inputs should be constant and work with almost all markets...
At 10:15 PM -0400 5/15/99, Robyn Greene wrote:
>
>Perhaps I'm out of the mainstream - but I think that the person who can
>design a
>system that will trade bonds and internet stocks wonderfully with the same
>inputs
>is a genius. Since I've never found that system yet - I think anyone who
>thinks
>he has such a system is a fool. Robyn
To build a good trading system, you need to find something that happened in
the recent past that correlates well with what the price is going to do in
the future. This is fundamental. Without it, it is just gambling.
That said, can you find some universal characteristic that works on all
markets? There obviously are some. You can apply a moving average to the
price and buy when it turns up and sell when it turns down. That is pretty
universal but will probably not be particularly profitable. Most of the
universal things are pretty apparent to lots of people so probably do not
work very well.
Then there are those who try to classify the mode of a market - trending
vs. congestion, etc. I have never had much success with this approach since
markets do not seem to switch cleanly between the different modes making
the modes are very hard to identify. And techniques that work in trending
markets get killed in congestion, etc.
So I would suggest that the most interesting and most profitable
characteristics on which to base a trading system are specific to an
individual market, or possible a combination of two markets. As an analogy,
a voice recognition system that works on all languages is almost certainly
likely to be poorer on English than is one designed to work only on
English.
Bob Fulks
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