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Bill,
I am also working on a stock switching model.
Perhaps you could share with us about your "switching model".
Neal
Neal,
My testing is not yet complete. I do not have any results to report,
yet. As for the premise for the switching model, there are two
directions I am going to go.
1. The first thing I want to do is characterize the stocks in my
groups. I want to find out if the strongest stocks in the groups
continue to be strong, or is it the laggards that start to heat up. I
firmly believe that no matter what system you are trading you need to
operate with an "edge". For me, my "edge" comes from knowing how the
market acts during my different "zones" (previous post). For those of
you trading technical analysis systems, this "edge" is the equivalent of
knowing if the market is volatile or quiet, trending or consolidating,
and the direction of the long-term trend (up, down, or sideways).
2. I described the switching model I use for mutual funds in a previous
post. Once the "hot" group is identified, I will apply the same
switching method to the stocks in the "hot" group.
Notes on system testing: I may be a bit anal retentive when it comes to
developing a system, but here are some of the guidelines I follow when
developing a new system:
A. One should use either walk-forward testing, or out-of-sample testing.
B. One should test over the longest time period available (I heard Omega
is going to lift the restriction on Tradestation limiting the number of
bars in a test).
C. The final parameters should not be sensitive. Other values in the
same ballpark of those you choose should yield similar results.
D. One should take into account all "real world" problems. This may
seem obvious, but before you test, find out what fees are related to the
instrument you are trading. I am talking about commissions, loads,
switching fees, and slippage. BE PESSIMISTIC!
E. Make sure the system conforms to your personality or else you will
not follow it in the future. If you find yourself flustered and
disoriented trying to daytrade, maybe a longer time frame is for you.
That's just my humble opinion. I will keep the group informed of any
results as they become available.
Bill Bancroft
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