Backtesting

Discussion in 'Trading' started by traderich, Feb 5, 2007.

  1. I wonder if you had a heart attack and needed an electronic pacemaker do you choose the untested pacemaker or the tested pacemaker?

    The hospital might have a new robotic surgeon. Robot is completely automated. Robot is scheduled to install your new pacemaker. I wonder if you choose the tested robot or the untested robot to perform your heart surgery?

    Perhaps you wish a second opinion and ask a cardiologist to examine your case. Do you choose a cardiologist that is tested by medical school or an untested cardiologist?

    The cardiologist may prescribe drugs. Do you choose the tested drug or the untested drug?

    Some people test things to avoid experiencing a crash.

    [​IMG]

    Others might avoid testing things to experience a crash.

    The choice is yours.
     
    #31     Feb 10, 2007
  2. bighog

    bighog Guest

    Signs of spring. racing season starts soon, F1 and nascar. (notice nascar is NOT in caps :D ) I like racing but watching nascar is like watching paint dry.

    F1 rules. With that said i thought this was fitting for a backtesting thread.

    Jeff Burton said: "you can't simulate a race no matter how much testing you do "
     
    #32     Feb 10, 2007
  3. bighog

    bighog Guest

    Speaking about racing i read back a couple pages and noticed a comment about cheating. i mean jack hershey is so good he claims his way is CHEATING.

    Now that is taking being a charlatan to a new level, claiming to be so good that he is cheating. Sorry Jack, could not resist.
     
    #33     Feb 10, 2007
  4. Fine with me. your comment helps make a point about how it feels to use the SCT.

    It is not the "so good" orientation but the viewpoint of seeing what is there for the taking and working to extract it.

    It is simply there and I can't affect its flow but on the other hand I can apply cars to it according to the money velocity represented and just take as much of the flow as possible as it comes down the pipe.

    I feel that people are monitoring; they see the size and pace of the flow and yet they are not participating except at occasional times when their strategy is "workable".

    81 bars a day on 5 min chart. All bars have a given volatility. and the bars are forming trends and patterns, all tradable in sequences which repeat.

    It is well worth considering. It is like it is there: what is there to backtest??
     
    #34     Feb 10, 2007
  5. bighog

    bighog Guest

    Jack, have a good weekend. Tell spydertrader i am pulling for the Toyota cars. But truth be known, just like trading, Toyota has a learning curve to go through. Good Day
     
    #35     Feb 10, 2007
  6. Jack, I feel a little responsible for describing one aspect of your methods as "almost cheating" on another thread. LOL.

    Ed Seykota, who I know you admire, strongly advocates backtesting. He also expects drawdowns in his systems (up to 40%, say) and considers day-trading to be inherently unviable due to increased transaction costs relative to potential profits and the risk of over-trading. I think he would also say words to the effect that if you can't code a system (automatic signal generation) then you don't really have a system at all (but you may well have something else that fulfills some other need).

    One reason your methods are difficult to backtest is that they rely on being present in the NOW of each bar formation: the signals are often fleeting and contextual (sequences). Has anyone come close to coding / backtesting your methods successfully i.e. Stanford?

    I wonder what it would take to convince Ed that your approach has merit - he seems to think the intraday wiggles are merely noise.

    Maybe the theory of the large will one day be unified with the theory of the small. :cool:
     
    #36     Feb 10, 2007
  7. Ezzy

    Ezzy

    Jack,

    I know this is getting off topic here, but could you answer a few more questions

    -------------------------------------
     
    #37     Feb 11, 2007
  8. bighog

    bighog Guest

    Here is the best way to backtest.

    Review your mistakes. Ok, Ok, if you really want to see how many mistakes you (and all of us) make day in and day out just review your chart at the end of the day.

    Maybe it is not so much a review of mistakes but rather a review of where you and all of us could heve done better.

    Backtesting is overrated. The proof of that is proven over and over when the real bullets fly. I am not a Doctor but i think the emotional level of doing heart surgery on a frog is quite different than doing the same operation on a member of the local high school. Point being, backtesting in the hands of an inexperienced trader is silly, at best.

    In backtesting traders are looking for something that works, something that will work in the future (how hard can that quest be?). Truth be known the fallacy of backtesting is it does not highlight what can go wrong. Thats what you are looking for, HOW TO AVOID. Finding what works is out there, has been out there, will stay out there. Use backtesting as a crutch, not as the answer.

    Backtesting is saying you never had an opportunity to make noney management decisions as the battle unfolded, that is not trading, that is gambling. As traders we reserve the right to change our minds, gamblers are locked in once the bet has been placed and the "WINDOW" is closed. Which are you?
     
    #38     Feb 11, 2007
  9. The Hershey Methods are outdated. Anyone who has been studying Quantum physics for any amount of time knows how the theories of single universe interactions are hopelessly incomplete. Market data shows this.

    Anyone with half a brain knows that you cannot make simultaneous predictions of conjugate variables which would be required for Jask's theories to hold. This has been known science for more than 100 years. The writings of Bohr and Dirac address these issues specifically.

    A more modern approach than Jacks antiquated and pre-newtoninan view of market dynamics is the Chladni vibrational models applied to a multiverse. These achieve much greater accuracy in the third and fourth potentiates. The correlation of angular momentums to volume is much greater as well.

    These truths should be apparent to anyone who has studied anything of use in the last 10 years. If we stuck to Jack's science we would not have been able to transcence the 100,000 transistor on a chip mark. A mature understanding of the true interactions at the subatomic level of waves is required for any sort of real correlation to the universal harmonics.

    New research into superconducting is also directly applicable.

    But we all digress. Why has this thread turned into a Jack Hershey pontification? Was this not supposed to be about back testing?

    Why is this man with obviously old science allowed to continue with his drivel? He clearly is using buzzwords to try and confuse those who do not understand the subjects he espouses.

    *Max*
     
    #39     Feb 11, 2007
  10. Very true Ezzy!

    All I was looking for was some information about backtesting. Could be articles or books or first hand knowledge. I was asking if backtesting relating to stocks was any different than someone who goes to the casino and writes down the numbers that come out on a roulette wheel. We all know that writing down the past numbers on a roulette wheel is completely useless for helping to find the next number that will come out, but folks still do it.

    Peace.
     
    #40     Feb 11, 2007