Is Walk-Forward (out of sample) testing simply an illusion?

Discussion in 'Strategy Development' started by pursuit, Oct 17, 2017.

  1. lcranston


    Not really. If retail were to implement the same strategies in the same way, they'd perform at the same level. But they don't follow the same strategies. Nor do they implement them in the same way. If nothing else, fear prevents them from performing rationally.
    #71     Nov 25, 2017
  2. ironchef


    Just curious, are you retail or professional PM?

    I wonder whether it is greed and ignorant rather than fear? Most retails I know bet way too much for each trade instead of too little (me included as I had no idea of Kelly and risk of ruin until recently).
    #72     Nov 25, 2017
  3. sle


    You know that’s not true. In most cases, a retail trader should and can do better than an institutional market participant. There are multiple reasons for it - lower liquidity needs, broader product universes, lack of negative selection imposed by irrational risk parameters etc.

    Additionally, there are specific areas were the only people that could thrive are smart retail traders.

    PS. In a few cases, retail traders would indeed do worse or not be able to participate at all. Examples are strategies where they don’t have the same market access or are unable to afford technological investments.
    #73     Nov 26, 2017
    tommcginnis likes this.
  4. lcranston


    Can and should but doesn't. The typical retail trader is undercapitalized, undisciplined, ignorant of market structure and demand-supply dynamics, and generally lazy. As for smart, of course; but many retail traders just aren't smart enough. Theoretically the "smart retail trader" ought to be able to out-maneuver the "institutional market participant". This is the sort of thing that's put out there by the industry to keep retail in the game. And losing (not "loosing") money. But too many retail traders approach trading the way too many people approach time-shares. So the only people who are making consistent profits are those who are selling courses and software and dvds and newsletters and alert services and, with few exceptions, books. Then there are all the articles and blogs and so forth written by people who aren't any more qualified to write about the subject than the typical retail trader.

    Picks and shovels.
    #74     Nov 26, 2017
    ironchef and tommcginnis like this.
  5. sle


    Actually, from my interactions on this forum, there are plenty of diligent and intelligent people. What these people lack is knowledge and experience. Given the right ideas they would be able to make money (after being spanked by the market a few times).
    #75     Nov 26, 2017
    tommcginnis and ironchef like this.
  6. melfa


    Without giving away your own strategies, do you have any recommendations for a retail investor on what knowledge or ideas to learn?
    #76     Nov 26, 2017
  7. userque


    Out of Sample:

    Optimize using segment 1. Test how it works using segment 2.

    Walk Forward:

    Walk Forward can refer to a particular type of optimization. Each day, new stock etc. data is generated. Re-optimizing on this newly generated data would be Walk Forward Optimization.

    #77     Dec 6, 2017
    ironchef, Simples and tommcginnis like this.
  8. Mysteron


    The aim being to provide adaption to new data so as to track varying market behaviour.

    And if anyone manages to set up a model of that process the next problem is to determine the period of the in-sample data which optimises performance of the adaption process over past data.
    #78     Jan 16, 2018
  9. ironchef


    Thank you.
    #79     Jan 20, 2018