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Apply technical analysis "indicators" to the equity curves
of the two systems and switch to whichever one is "strongest"
based on technical analysis.
Mark, does this actually work for you? When I tested it, it failed
miserably. When a system went into a losing streak, you'd take all the
losses it took for it to get kicked out of contention. Then when it
pulled out of the losing streak, you'd miss all the wins it took for the
equity curve to get strong enough again. It only worked if the system
was prone to extremely long winning or losing streaks -- long enough so
that "missing most of the losing streak" made up for the other
weaknesses. (E.g. a simple long-only stock system might benefit from
it, if you kept it out of multi-year down markets, but I believe you can
do a better job of that within the system logic itself.)
Now I wasn't switching *between* multiple systems, just between "system"
and "no system." But I would think the dynamic would be the same.
Gary
-------- Original Message --------
Subject: Re: Switch between systems
From: Mark Johnson <janitor@xxxxxxxxxxxx>
To: omega-list@xxxxxxxxxx
Date: 8/19/2009 2:11 PM
Apply technical analysis "indicators" to the equity curves
of the two systems and switch to whichever one is "strongest"
based on technical analysis.
For example, apply Fast Stochastic %K to each equity curve
and switch to the one with the highest %K.
Or calculate the N-day linear regression slope on each equity
curve. Switch to the one with the biggest slope.
Or, a favorite of mine, calculate the Bollinger oscillator
%B on each equity curve, and switch to the one with the highest
value of %B.
Reminder: %B = (Price - SMA) / STDEV
%B tells you which Bollinger Band intersects price.
When %B = -2.0 that means price is exactly equal to
the lower Bollinger band, the -2.0 stdev band.
Mark Johnson
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