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 Forums ›› Technically Speaking ›› Strategy (System) Design ›› Walk-Forward Testing and Optimization

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 trade4ever2day   Registered: Nov 2007 Posts: 274 03-22-12 10:45 AM Quote from savagemp5: I started writing algorithms and strategies with forward testing only after I had a stable and complete system, and knowing in mind what I wanted to write (hypothesis). Some other info can be found on my website: http://managemoneyonline.com/2012/0...traday-trading/ How is life these days in Singapore? Is it getting too expensive? How much a two-bedroom apartment costs? Back to the issue of optimization I think it worths reading Harris's paper: http://www.priceactionlab.com/Blog/...d-optimization/ I too think that if when you are optimizing you are essentially moving entry points around then you may have nothing and you are just trying to find a best fit of a random system. Edit/Delete • Quote • Complain
 Rationalize   Registered: Jan 2010 Posts: 838 03-22-12 11:03 AM Quote from intradaybill: I agree but since it is very difficult to measure DoF and added complexity of non-stationary systems, optimization must be avoided at all costs. This is my point. Mathematically you are correct (as always) but in practice it hardly works. Edit: Plus I hope you understand that "optimal amount of optimization" leads to an infinite regression and thus it cannot be resolved to a sound deductive procedure. Bill - I agree with your comment quite a lot. Adding my 2c: Without a solid microstructure or market structure based explanation, there's usually very little "there". Optimisation outside of fair value, flow and inventory models are generally at best a time consuming distraction. To take it one step further, I could propose that all the information about the next price is in the last price(s), and the order book(s). Nothing else adds new information. Edit/Delete • Quote • Complain
 ssrrkk   Registered: Jun 2005 Posts: 440 03-22-12 01:31 PM Quote from Rationalize: Bill - I agree with your comment quite a lot. Adding my 2c: Without a solid microstructure or market structure based explanation, there's usually very little "there". Optimisation outside of fair value, flow and inventory models are generally at best a time consuming distraction. To take it one step further, I could propose that all the information about the next price is in the last price(s), and the order book(s). Nothing else adds new information. I agree with this -- if there is no real signal, of course, optimization will only mislead (i.e., cause you to trust a system that is guaranteed to lose money). But if there is a real physical phenomenon that you are capturing that is defined by a physical parameter (e.g., the fair value as you say, or the amount of order imbalance, etc.), then I believe it is worth obtaining accurate estimates of that parameter. Also, I don't believe there is such a thing as a parameter-less system. There are always parameters: you may have cleverly made them proportional to (or some function of) other properties of the system, but you still need to calibrate that proportionality (or function). Edit/Delete • Quote • Complain
 savagemp5   Registered: Mar 2011 Posts: 211 03-22-12 02:08 PM Quote from alexandermerwe: How is life these days in Singapore? Is it getting too expensive? How much a two-bedroom apartment costs? Back to the issue of optimization I think it worths reading Harris's paper: http://www.priceactionlab.com/Blog/...d-optimization/ I too think that if when you are optimizing you are essentially moving entry points around then you may have nothing and you are just trying to find a best fit of a random system. Well it's quite expensive. Just recently the "COE" (a piece of blank paper that says you can drive on Singapore roads) costs about SGD\$80,000, not including the car. A 2 bed-room, assuming its a private apartment or a condominium costs somewhere 700k-1.2mil, depending on location. Foreigners would need an additional 13% levy, so you do the maths. btw USD/SGD @ USD1 : SGD1.266 Edit/Delete • Quote • Complain
 savagemp5   Registered: Mar 2011 Posts: 211 03-22-12 02:12 PM I always believe optimization is something like = algorithms where you write specific details about how do a particular action or calculation, smarter and better inteligent than if there wasn't any in place. A trial stop is one that beats a dead stop loss. A percentage-base stops loss may be better or worst than a fixed point/price-based stop. Add that with time ticks and other filtering mechanisms, and it would be much better than just a stop loss as an example. Edit/Delete • Quote • Complain
 wwatson1   Registered: Jul 2001 Posts: 746 10-15-13 04:30 PM If you torture the data long enough, it will confess to anything Edit/Delete • Quote • Complain
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