Bset Number of Trades to Judge System Performance

Discussion in 'Strategy Building' started by dima777, Sep 3, 2008.

  1. It's entirely a function of the complexity of the system. If you have just few entry filters, then 100 trades are probably enough. If you have more, then very quickly you'll need 1000s of trades.

    In my experience, the only realistic way to obtain good statistical coverage is to run the same system on a large portfolio.

    On little example: on one of my intraday systems, i have 450 trades the last 3 months. That's enough for me to trade this particular system. It's a relatively simple system with few rules.
     
    #21     Sep 4, 2008
  2. dima777

    dima777


    thanks..but 1k is 10 times larger than 100 cited above..I wonder why so huge a difference...
     
    #22     Sep 5, 2008
  3. dima777

    dima777

    does this mean that you belie only fundamentals-driven systems can work for more than a year?
     
    #23     Sep 5, 2008
  4. dima777

    dima777

    is it better to have instruments of different types in portfolio? - eg indexes, currencies, commodities...
     
    #24     Sep 5, 2008
  5. It's ideal if you can have different instruments as well.

    I've found, however, that systems that work well on stocks, rarely work well on currencies. So while theoretically a good idea to test across all asset classes, my experience is that this rarely works.
     
    #25     Sep 5, 2008
  6. Are you talking about intraday, position or trend following systems. The difference is importnat.

    A trend following system with good filter for sideways markets may generate one or two traders per year. In 5 years you get 10 trades max or less. Does that mean it is not statistical significant result?

    On the other hand, an intraday system may generate 500 trades per year. Does that mean it is statistical significant? Most of that may be noise trading. What you care is the confidence level not significance.

    Just recall what statistical significance means. It means that the result could not have been obtained by chance alone.

    So what? If I have a trading system that generates one trade per 10 years but that is a sure-fire thing because I have an edge, why should I care about significance at all?

    Read this to find out why statistical significance tests are useless:

    http://www.sciencedirect.com/scienc...serid=10&md5=b94f5bc8cd7ef2888c54b50b8d183187
     
    #26     Sep 5, 2008
  7. I have read several times now that 30 is the minimum sample size to be of any significance. Can anyone tell me where this number comes from?
     
    #27     Sep 5, 2008
  8. dima777

    dima777

    thanks...very interesting opinion that captures some of my own feelings towards this subject....the fact is my system is of the first type - producing only a few signals per year per instrument...btw...do you have full access to this site? i was only able to read the outline...
     
    #28     Sep 6, 2008