Apologies to the forum. Obviously the duplicate did not emanate from my actions.
BrianB2. --- In [email protected], "brian.z123" <[EMAIL PROTECTED]> wrote: > > Howard, > > Thanks for your post. > I value the opportunity to talk to quality people on a quality topic. > > In laymans terms; does the servitude to the objective function > require compromising the multiple sub-objectives? > If so who makes that decision; when, where and how is it made? > According to the Calresco site, these decisions are made by the > *programmer* on a subjective basis. > > If there are 3 or more sub-objectives with, with 2 or 3 metrics for > each and, say a range of 20 for each of the metrics parameters , > doesn't the range of possible compromises become somewhat wide? > > If we could extract the metrics for each of those multiple paths on a > point by point basis, I wonder if, with hindsight, *we* might like to > change our prior subjective choices. > > Re walk OOS/walk-forward. > > A money game derived from the toss of a fair coin with +1 and -1 > win/loss values assigned to each side of the coin is played by 1000 > people. > They are not aware of the nature of the game, only their individual > outcomes i.e. their equity curves or trade value time series as they > unfold. > > An observer, who is a mathematician, knows the game is break-even and > also all of the metrics for the game in advance, but the players > don't. > > At the end of 1000 plays, in all probability, not one single player > will have exactly broken even. > Approx 60% of players will have a small win or loss record, while on > the other end of the scale < 5% of players will have either an > extreme win or extreme loss outcome. > In all probability not one single equity curve will be exactly the > same as any other. > > If one of the extreme winners happened to be a mathematician and > decided to calculate his/her future in the game, would muliple valued > objective analysis, arrive at any conclusion other than that it is a > rosy one? > By any measure, would the extreme winners not be justified in the > belief that their future in the game is rosy? > > To the observer the 1000 equity curves, when expressed as a > probability, represent a good approximation of all possible future > outcomes of playing the game, for that exact number of plays. > This is true to the basic tenents of maths, which state that the > future can only be described in terms of probability. > > If all of the equity outcomes are written on a marble, placed in a > basket, and drawn at random, this test would represent a true model > of a blind or walk forward test. > > For a trader, who has backtested, the basket also represents > historical results. > > Go ahead and draw your 2 marbles; one for your in sample (IS) equity > curve and one for your out of sample (OOS) equity curve. > > What is the chance that your first outcome will truely represent your > future in the game? > > What is the chance that your second equity curve will truely > represent your future in the game? > > What is the chance that your first equity curve will be within coeee > of (Aussie slang for close to) the first? > Should we define close as 50%, as Mr Pardo does? > Why not 49 or 51? > > Does the first marble tell you (more/less/the same) about your future > in the game, compared to the second? > > What are the chances that your first and second marbles will both be > *good* ones? > Is that a better or worse *sign* than drawing one *good* one followed > by one *bad* one? > > BrianB2 *:-) > > --- In [EMAIL PROTECTED] <mailto:amibroker%40yahoogroups.com> ps.com, > "Howard B" <howardbandy@> wrote: > > > > Greetings -- > > > > I'd like to add a comment on multivalued objective functions, > particularly > > as they relate to Monte Carlo analysis and walk-forward testing. > > > > As your trading system development moves to the stage of having a > > walk-forward process performed automatically, it needs to be guided > by an > > objective function that incorporates all of the features that are > important > > to you and can be expressed as a single scalar value. > > > > As you know, the walk-forward process divides the entire time > series being > > used into a sequence of in-sample periods, each followed by an out- > of-sample > > period. A search procedure picks the single Best set of values > for the > > trading system's optimizable variables for a given in-sample > period, then > > records the results of using those values to simulate trading over > the > > out-of-sample period. Then it slides the starting dates for both > the > > in-sample period and out-of-sample period forward, usually by the > length of > > the out-of-sample period, and does the search over again. This > process > > continues until all of the data has been processed. The results > from the > > out-of-sample periods are concatenated together and are used to > decide > > whether the trading system is a good one or not. > > > > The key point here is this: the search procedure must make its > decision on > > which set of variables is Best based on a single value -- the value > of the > > objective function. By the time the development reaches this > stage, we, as > > system developers or programmers, will not have an opportunity to > look down > > the list of alternative trading systems to see if we would have > picked one > > other than the one at the top of the list. So, as we are working > with > > multivalued objective functions, we must incorporate them into a > > single-valued objective function that fits our trading requirements > or > > personality and that we trust to sort the alternatives into the > order we > > prefer. > > > > AmiBroker has the capability to creating custom objective > functions. There > > is an extensive discussion in my book about objective functions. > The > > discussion includes an example of using AmiBroker's custom > backtester to > > create a single-valued objective function by starting with a central > > objective function, then applying penalties (which can be positive > or > > negative) to it to take secondary goals into account. > > > > In fact, I think that objective functions are so important that > selection of > > the objective function should be the First step in trading system > design. > > If the objective function fits the trader, most of the problems > related to > > the difficulty of following a trading system and of the psychology > of > > trading disappear. > > > > Thanks for listening, > > Howard > > www.quantitativetradingsystems.com > > > > > > > > > > > > > > On 17 Mar 2007 03:06:02 -0700, thomasdrewyallop <drewyallop@> > wrote: > > > > > > Hello all, > > > > > > I have been working on the MCP technique described in Aronson's > book > > > for some time now. I have just completed conversion of the C++ > code on > > > the web site to C# plus some associated utlities to massage AB > data > > > into the required format yet. No test yet; I will update under > this > > > thread. > > > > > > A few words on the theoretical underpinnings. There has been new > > > information since the book was published and the code written. I > > > believe an update is in the works. Also you need to be cautious > when > > > running MCP on IS data. This is only valid under certain > conditions. > > > Otherwise you must run OOS. I had an email from Aronson > explaining all > > > this but can't find it. You might want to contact David directly - > a > > > good guy and willing to talk with readers. > > > > > > Finally, I would not reject walk forward. A very useful technique > > > despite Aronson's reservations. Well integrated with AB too via > Fred > > > Tonetti's IO add-in. > > > > > > Best regards, > > > > > > Drew Yallop > > > > > > p.s. just remebered that there is discussion on MCP as a possible > > > future addition to AB. Look in the AB suggestions section of the > web site. > > > > > > > > > > > >
