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Random.Capital
Registered: Jan 2005
Posts: 3848 |
07-22-12 08:46 PM
Quote from logic_man:
It's the Higgs boson of the algo.
IMO that's putting things backwards.
The selection of the algo - which buries more assumptions than does adding any number of parameters - is the higgs boson of the algo.
...a principle of robust design is that the fewer hard-coded parameters, the more robust the design.
That's backwards, too. The more "hard coded" parameters there are, the easier it is to validate any given piece of software, all else being equal, as there are that many fewer degrees of freedom to worry about.
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logic_man
Registered: Oct 2010
Posts: 1489 |
07-22-12 09:19 PM
Quote from Random.Capital:
IMO that's putting things backwards.
The selection of the algo - which buries more assumptions than does adding any number of parameters - is the higgs boson of the algo.
That's backwards, too. The more "hard coded" parameters there are, the easier it is to validate any given piece of software, all else being equal, as there are that many fewer degrees of freedom to worry about.
If it's the "ultimate" algorithm, it isn't really burying any assumptions, is it? It's a reflection of market reality.
That's odd that you say you want more hard-coding because when I was writing code in the early 2000's, I was always told not to hard code anything unless it was absolutely necessary. You would give the end user opportunities to enter the necessary parameter values, rather than trying to anticipate them in advance. You would do error-checking to validate that the values were proper for the application, but that is different from hard-coding values.
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joethetrader
Registered: Jan 2009
Posts: 4 |
07-23-12 07:18 PM
I'm learning this stuff so this is a genuine question not meaning to challenge: I read everywhere else that having too many parameters tends to lead to over-fitting models. How would you reconcile your theory with that?
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logic_man
Registered: Oct 2010
Posts: 1489 |
07-23-12 10:30 PM
Quote from joethetrader:
I'm learning this stuff so this is a genuine question not meaning to challenge: I read everywhere else that having too many parameters tends to lead to over-fitting models. How would you reconcile your theory with that?
That's a question (how many parameters is too many?), that I don't know that I have a solid answer to, actually. But I think wanting to have as few as possible fits with my hypothesis that the best trading system would have one parameter at its core. That just seems like the most logical outcome, since it would seem that such a system would be based on one unique insight.
One way to think of your question's answer is to realize that, if you take everything that "can" be a parameter in a model, then you are talking about hundreds or thousands of possible parameters. That being the case, any subset of even 10 only scratches the surface of how over-fitted your model could be. Ideally, each one would bring something different to the model.
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jack hershey
Registered: Feb 2003
Posts: 7379 |
07-23-12 11:10 PM
Quote from joethetrader:
I'm learning this stuff so this is a genuine question not meaning to challenge: I read everywhere else that having too many parameters tends to lead to over-fitting models. How would you reconcile your theory with that?
There is a specific and very high utility answer to your question.
All system design operates with a few major principles in mind.
All the troubles mentioned here in this thread so far, do go away if the designer/developer is able to start from the beginning.
To define a system, a set is required.
The word set describes a collection.
The specific and well articulated rules (principles) for doing this defining of a system are crystal clear.
The set must be complete.
And the expresession of each element of the set must be in "like kind".
For trading in markets, the set was defined long ago* and to this day works perfectly.
FYI the set has two elements.
As markets operate, the participants perform as they can by following the rules the owners set forth for their participation. Collectively, each participant contributes as he is allowed by the size of his capital and with regard to the instrument characterisitcs.
The consequence of having the set and using it, is that in markets, it becomes observable that there is no noise, no flaws and no anomalies.
A side topic was introduced by a bystander (intellectually speaking) to this thread. Higgs is still alive. CERN is again working and being brought up to its full capability. It is 8/13th of the way there. When the energy of the system is at full force, It will be possible for a lot of computers to work together to determine how mass (see Einstein) is created by particles in space moving through a Higgs field.
Markets were simpler to figure out and it was done long ago. So I have just posted these known results for you to have. "Hard cored parameters" is a misnomer. Notwithstanding this error, the system of the markets is defined. All markets share all the commonalities required in order that one system results for all markets.
*The people who did it and made it public are long dead. These people were different than the people who did the mathematics to make it possible for the problem solvers to reach their elegant solution.
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