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A negative Z-score means that there were fewer streaks in the sample of
trades than would be expected statistically.
A positive Z-score means that there are more streaks in the trading system
than would be expected.
This zscore analysis may also be used to switch.
The biggest issue here is that the switch should be part of the adaptive
system, not a "fix" put on a set of weak systems to
attempt to improve performance.
Mike Barna
President,
Trading System Lab
"TSL automatically designs Trading Systems
in a few minutes using an L-AIM-GP."
"Software that Creates Trading Systems with no coding"
www.TradingSystemLab.com
----- Original Message -----
From: "Gary Fritz" <fritz@xxxxxxxx>
To: "Mark Johnson" <janitor@xxxxxxxxxxxx>
Cc: <omega-list@xxxxxxxxxx>
Sent: Wednesday, August 19, 2009 1:24 PM
Subject: Re: Switch between systems
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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