I didnt see the Degree of freedom question
Suppose we have one rule set buy = c > ema(c, pds);
we put this through our dataset of 200 symbols each with 2000 bars
So there is 200 * 2000 = 400000 Dof in terms of the Closing price.
Note that Dof in h, l, o and volume is irrelevant because we dont use
them.
if pds is a single no. then we have used up only 1 dof, but if
pds = optimize("pds", 30, 10, 100, 1);
then we effectively have 91 rules, just that we only choose one of
them after looking at the results of 91 rules.
So I believe the Used dof is the no of possible permutations
expressed in your optimization statement + other fixed rules, implied
or otherwise.
Hope that helps
/Paul.
--- In [email protected], Thomas Ludwig <[EMAIL PROTECTED]>
wrote:
>
> Hi all,
>
> Rober Pardo suggests in his book "The Evaluation and Optimization
of
> Trading Strategies" the calculation of "Perfect Profit" (PP)
which "is
> the sum total of all of the potential profit that could be realized
by
> buying every bottom and selling every top". By comparing Net Profit
of
> your trading system with PP you can calculate the "Model
Efficiency"
> (ME).
>
> I think PP can be easily calculated as a stand-alone code by
applying a,
> say, 1% Zigzag. But how can it be done if I want to add ME as an
> additional metric in the Custom Backtester? The Equity() function
is
> used for your trading system and cannot be used for the Zigzag
system
> at the same time in order to compare both, IMHO. So the only
solution I
> can think of is to loop through all Zigzag signals and calculate
the
> profit programmatically. Or am I overlooking something?
>
> Pardo also suggests to calculate the Remaining Percentage of
Degrees of
> Freedom (through Used Dgrees of Freedom and Original Degrees of
> Freedom). Any idea if and how they can be counted in AFL?
>
> Regards,
>
> Thomas
>
