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Most short-term systems depend only upon the bar-to-bar changes and
are independent of the absolute level of the price. If this is the
case, the offset due to back-adjusting has no effect.
You can test this by adding a constant to all prices and see if the
trades change. Simply replace "Close" by "Close + 300", for example.
If the trades remain the same, there is no effect from the offset.
Bob Fulks
At 8:34 PM +1000 7/10/00, Mel wrote:
>Testing on back adjusted data (going back 18 years) it is not too
>hard to come up with systems that appear to do well particularly in a
>long term rising scenario. Question is how can I have faith in
>results where the early back adjusted prices are significantly higher
>with relation to the real prices at the time. Obviously any
>optimization of any system will have significantly different
>weighting with relation to the real prices at the time. How can this
>weighting be equalized - would detrending of the back adjusted data
>reduce/eliminate any bias or should one incorporate a data2 (real
>contract) price in the system testing? My goal is to reduce the
>number optimization inputs to a minimum so that as a robust system I
>can trust the results. Any thoughts?.
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