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GREHERT@xxxxxxx wrote:
>
> Let's stop condemning optimization!
>
> I'd like to come to the defense of optimization. I use optimization in
> developing trading systems that trade stocks and stock market indexes.
> Optimization let's you know what parameters worked the best historically. And
> if you believe history is the best evidence for the future, then optimization
> gives you the future's best parameters.
>
> What optimization doesn't give you is a valid prediction of future returns.
> The crime of optimization is when hucksters claim future profits should
> approach optimized profits. In reality, future profits will probably fall
> some where near the middle of your range of profits that result from your
> parameter array.
>
> Best Regards,
>
> Jerry Rehert (grehert@xxxxxxx)
> Atlanta, GA
> @ 11:47 pm, July 7th, 1998
There is a lot to be said about optimization. I remember a few years
back when I got my System Writer plus I "back-tested" a break-out
system. I used many different variables and found that the same system
performend differently with different markets. When I adjusted the
parameters..."Optimized" I found that the results were greatly enhanced.
In other words, each market had it's own personality and, as a result,
reacted different under different parameters. What worked for coffee,
did not work well for cattle...etc. Same system, slightly different
parameters.
I think the flaw with "Optimization" is that soem vendors will cut the
pattern to fit the cloth. There was one mention yesterday of a
partciular vendor that has allegedly done that. I also know first hand
that this particular vendor has been in business for quite a few years
(operating under a different name in the late 80's) and they did that. I
was a "victim" of there marketing.
When I called them on it I was told that each system sold was just a bit
different so to avoid saturation. Unfortunatly, they published the best
performing system and lea us all to believe that the reuslts would be
the same for everyone...when in fact only one system performed that way.
And if another one of their systems took over the lead, they started
reporting those results. Optimization at it's finest.
Good Trading All................GEM
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