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Michael wrote> This brings to mind what I consider a vital question
regarding
re-optimization. Does anyone have any hard cold statistics as to the
workability of "walk forward" (or re-optimization) of systems? Or do you
know where I can find the information? I've seen and remember debates but
don't remember any black and white comparisons or any actual trades in any
of the discussions.
* * * *
Michael re hard evidence
Louis B. Lukac and B.Wade Brorsen wrote a graduate thesis entitled "The
Usefulness of Historical Data in Selecting Parameters for Technical Trading
Systems". Their study compared the results of fixed parameters and periodic
reoptimizations of the parameters on two trend-following systems.
They concluded "The results of all the tests suggest that the forcasting
ability of optimization is limited. Optimization was not able to forcast
parameter sets which would produce portfolio profits better than a random
selection strategy."
This informative study was reprinted many years ago by Ed Dobson at Traders
Press. (he sold it for about $10. I don't know if it is still in print).
As I recall the best results were obtained by finding one good set of
parameters and then sticking with those. Periodic reoptimizations did not
improve the test results.
This is only one study but I have never seen any study that showed that
reoptimization actually helped. However if you give any value to anecdotal
evidence there are many traders that seem to be fond of this questionable
technique.
Chuck LeBeau
www.traderclub.com
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