Registered: Oct 2010
07-19-12 05:12 PM
Quote from dom993:
Hard-coded parameters or not, the algo itself is already a huge anchor ... I'd say from a flexibility point of view, you should have all parameters accessible & modifiable, with proper default value.
A related question is: "identical parameters values for distinct markets, or individual (ie. optimized) parameters values specific to each market".
My current answer goes to "individual parameters values", because each market truly has its own character ... this is certainly true for intraday trading, it might not be for swing/position trading ?
Yes, the 1 hard-coded parameter would be what gives the anchor it's "weight". It's the Higgs boson of the algo.
I am finding a discrepancy in the optimized individual parameter values in markets as I expand my circle of markets traded. A trigger that would I'd consider unusable on the ES and filter out is perfectly fine (and even better than average) on Crude, to take my most relevant example. Same model, but different outcomes.
So while the theoretically correct answer might be no, don't optimize by market, because the use of optimized values for each market is premature without knowing the future distribution of trades for those markets where the parameter value is outside the optimized range, the practical thing is to filter those trades outside the range at least until the combined historical record of those trades generates positive expectancy (with the flip side of that being to remove those trades which look promising to start, but fail to work out of sample in real trading). Keep them on the sidelines until they can prove their value. And even then, only trade them with a minimal position. That's my approach.
However, I have found that once a set of parameter values fails to generate positive expectancy, it never really comes back to do so, although there can be some spectacular trades within those sets of trades. I had a ~$6 win on Crude get filtered out a couple weeks ago, for example, but primarily because an earlier trade of that "type" had generated an ~$12 loss, so why would I take it?
Again, though, this could just be that the sequence of trades I'm experiencing is not conducive to positive expectancy from those parameter values at this time, but will be at some point in the future.