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Bilo,
First time I agree on something you said :)
My experience in developing and using a trading
system is that one do not wait for the system
to fail to perform to realize that it has failed.
Most of my work in trading a system is not
monitoring the system, instead, it is the end of day
analysis on the data collected to see if they still
demonstrate the same statistical behaviour that
the system was designed to exploit.
backtesting to me is the analysis of the statistical
behaviour of the data - to see if some sort of
consistency exists overtime, not wasting time to
twist a system from not profitable to profitable.
thus, real trading systems do not fail at all because
they are all attached with their own premises. It
looks like they fail to perform because they are
applied to data that they are not suppose to be used
on!
e.g. 70% congestion 30% trend data with 1000 bar
consistency. then one day, you notice the latest
1000 bars has about 60% congestion 40% trend -
something has changed.
unluckily, most people using TS will not even know
what those premises are :)
-Lawrence
--- Bilo Selhi <citadel@xxxxxxxxxxxx> wrote:
> you don't need any historical data to test this type
> of system.
> you can create synthetic price time series with
> various
> key statistical characteristics and test the system
> on that.
> there are several variables that you can play with
> there.
> trendiness, noise, volatility, etc...
> you can recreate virtually any price time curve and
> study
> how your system works on that curve.
> < snip all the rest >
=====
Lawrence Chan http://www.tickquest.com
Home of trading tools NeoBreadth and NeoTicker series
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