Hello Whitne, Thanks for your post. Two of your leads provided new material for me.
I am not using MCP but I have it under consideration. Conceptually, if not practically, I have rejected the walk forward method, which means I am bound to consider all methods that validate single sample tests. So far I am considering three approaches and measurements for each: error, significance and symptoms of overfitting. Obviously something from amongst those groups will have to do better than the walk forward hypothesis for me to accept it. It might end up that none of them will provide a conclusive answer but *in the land of the blind, the one eyed person is King*. At the least study, in this area will improve my depth of knowledge of evaluation techniques. BrianB2. --- In [email protected], "whitneybroach" <[EMAIL PROTECTED]> wrote: > > While reading David Aronson's book _Evidence-based Technical > Analysis_, I stumbled across a modified Monte Carlo permutation > (MCP) procedure that compensates for data mining bias, assuming that > the "best" permutation of rules was not selected with a directed search. > > From Aronson's perspective, this is good news. He views data mining > as a useful procedure in the discovery phase of research. Plus, MCP > does not require out-of-sample data. Thus it is possible to use more > data for mining and still minimize data mining bias in test results. > The likely result: fewer false positives for systems that are > worthless, and fewer false negatives for systems that are valuable. > > The paper with discussion and C# code is here: > <http://www.evidencebasedta.com/MonteDoc12.15.06.pdf>. > > Aronson's book site, including a link to Amazon, is: > <http://www.evidencebasedta.com>. Separately, I'm looking forward to > the imminent books from Howard > <http://www.quantitativetradingsystems.com/> and Ralph Vince > <http://tinyurl.com/2os2p7>. > > Not being a user of IO (or other AB add-ons), I have no idea if this > MCP approach is already being used in the AB community. It looks > interesting to me. MCP appears to require market data and trade data > from every run, not simply the trade data. That suggests to me that > an AB add-on, rather than a completely external program, would be a > more straightforward implementation. > > Aronson also refers to a patented boostrap procedure that accomplishes > much the same thing, White's Reality Check, named for Halbert White, > the patent holder. Apparently WRC is not available commercially. > > Best, >
