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<FONT face=Arial color=#0000ff
size=2>Fred,
<FONT face=Arial color=#0000ff
size=2>
I'm
surprised at your statement that<FONT color=#000000
size=3> Compounding of numbers of positions is virtually the same as
compounding position size in terms of the effect on the equity
curve.
<FONT
face="Courier New">
<SPAN
class=749281019-21062003>Don't you think
that an equity curve with a couple of very big compounded winners (or losers)
could look quite different than one where profits were spent buying more
positions? The real problem that I have with simply compounding
dollars (in backtesting) is that a system ends up trading about 100 times the
average daily volume of a particular stock. Through programming, of
course, one can limit the size of the investment to a realistic percentage of
the daily volume. But many of the equity curves that I see
distributed around the place don't seem to give this concern any
credence.
<SPAN
class=749281019-21062003>
<SPAN
class=749281019-21062003>There are as many ways of investing profits as there
are traders, but since my systems usually generate many more signals than I have
dollars to trade, I prefer fixed position size with variable number of positions
when evaluating a system. When I start to run out of signals, then I
would start increasing the bet size.
<SPAN
class=749281019-21062003>
<SPAN
class=749281019-21062003>That's just my opinion, of
course.
<BLOCKQUOTE
>
<FONT face="Times New Roman"
size=2>-----Original Message-----From: Fred
[mailto:fctonetti@xxxxxxxxx]Sent: Saturday, June 21, 2003 3:06
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: [amibroker] Re:
Historical volume filteringPhsst,That's not
what I stated ... What I said was ... based on fixed position sizes
with fixed numbers of positions.Compounding of numbers of
positions is virtually the same as compounding position size in terms of
the effect on the equity curve.Fred--- In
amibroker@xxxxxxxxxxxxxxx, "Phsst" <phsst@xxxx> wrote:> Fred,
> > I do test fixed position sizes, but not fixed numbers of
positions.> > A trading system that is tested with fixed
position sizes will yield> system returns and dd's which are totally
different from the same> trading system that is tested with compounded
position sizes. But to> say that system returns and dd's are 'masked'
by ones choice of> position size is incorrect. Different position size
methodologies are> simply going to yield different overall
results.> > Remember... when I originally posted that I used
fixed position size> backtesting, there were no tools available for AB
that facilitated> true portfolio backtesting... thus backtests that
were allow to> compound generated false results.> > Now
that you and UM have provided tools to facilitate portfolio>
backtesting I will eventually get around to looking into compounding>
stradegies.> > I don't claim that my way is the right way or
that any other way is> the wrong way. It is simply the way I've chosen
to do it.> > Phsst> --- In amibroker@xxxxxxxxxxxxxxx,
"Fred" <fctonetti@xxxx> wrote:> > Phsst,> > >
> Those of us who can't relate to testing based on fixed position sizes
> > with fixed numbers of positions can't because they mask true
system > > returns and dd's. When and if someone provides
a description of how > > this is not so we would be happy to
think about it otherwise.> > > > --- In
amibroker@xxxxxxxxxxxxxxx, "Phsst" <phsst@xxxx> wrote:> > >
Chuck,> > > > > > I've been keeping 'grandkids on
steroids' today, so I am a little> > > punch-drunk. I've read
all the posts on this thread and have a > > couple> > >
of comments.> > > > > > Your database goes back to
'85. As I relate to my own situation, my> > > average
Positionsize in '85 was only a fraction of my Positionsize> >
> today. I've been backtesting since the late 80's, and have used >
> VOLUME> > > for two (2) purposes... (1) to gauge price
action, and (2) to gauge> > > liquidity as it related to MY
POSITION SIZE. On the second count, as> > > my personal
positionsize increased, so did the average volume in the> > >
markets. > > > > > > As mentioned in subsequent
posts on this subject, I've filtered both> > > my backtests
and my actual trades based upon a volume multiple of my> > >
Positionsize as opposed to x# of shares traded per day,
irrespective> > > of price.> > > > >
> You and I have both stated that we backtest based upon 'fixed >
> position> > > size'. And yet other people are not able to
relate to that. They > > seem> > > to think that
everyone 'compounds' their trades on a daily basis> > > depending
upon their account size growth or demise as a direct > >
result> > > of trading results. The truth (for me) is a
compromise... As my> > > account size grows(whether thru trade
profits or savings) I > > gradually> > > increase my
Positionsize, but it is not directly proportional to> > > trading
success.> > > > > > So in my mind, increases in
actual market trading volume are just> > > about proportional
to increases in my own account size, and are> > > therefore a
'non-issue'.> > > > > > Another issue for me is your
multiple posts relating to prefering> > > non-split adjusted
data.> > > > > > Every time you've mentioned your
preference for 'non-split adjusted> > > data', I've chosen to
ignore the subject rather than to open it up > > as> >
> an issue.> > > > > > But it is time to ask the
crucial question... if you really use> > > non-split adjusted
data, how do you account for stock splits in your> > >
backtest results where a 2 for 1, or 3 dor 2, or 4 for 5 stock
split> > > has occurred. For example if your system generates
a trade when the> > > stock price is at 50, and a 2 for 1
split occurs dropping the price > > to> > > 25
(reducing your position by one-half), how in the heck do you> > >
account for the price reduction which did not REALLY account for a>
> > loss in your 'real life account' but which devasted your
backtest > > results?> > > > > > Just
curious.> > > > > > Phsst> > > >
> > > > > > > > > > > >
> > groups.com, "Chuck Rademacher" <chuck_rademacher@x>
wrote:> > > > I was about to send this email to "b", but I
would welcome > > comments from> > > > anyone else
interested in such historical work.> > > > > > >
> At the risk of having some of you ask why it matters, my > >
backtesting> > > > generally goes back to
1985. Just yesterday, I posted a message> >
> to this> > > > group saying that I always use one set of
parameters across all> > > stocks and> > > >
across all timeframes. One of the downsides of this
approach> > > (perhaps) is> > > > that volume has
changed over time. I suppose that one could > > argue
that> > > > volatility changes over time as well.
Volatility, however, goes> > > through> > > >
cycles and volume just keeps growing.> > > > > >
> > The question that I have involves volume filtering. To
me, it is> > > essential> > > > that volume
filters be applied to actual volume and not > > backadjusted>
> > volume.> > > > My concern, however, is that if I
apply a filter requiring an > > average of> > > >
300,000 shares, I don't get very many hits back in the late 80's >
> and> > > early> > > > 90's.> >
> > > > > > I have a solution in mind and would
appreciate some input or> > > dialogue on the> > >
> subject. It seems to me that volume filtering should be
based > > on some> > > > percentage of the total
volume of all NYSE stocks (for > > instance). I>
> > > haven't done my homework yet, but let's say that the average
> > volume> > > today is> > > > ten
times more than it was in 1985. If I decide to filter today
> > at> > > 300,000> > > > shares,
wouldn't it make sense to filter based on 30,000 shares in> >
> 1985. I> > > > can probably answer that
question myself by saying that I don't> > > think
30,000> > > > would be an adequate filter in 1985.
But I could scale it from> > > 100,000 to> > >
> 300,000 progressively between 1985 and 2003 based on
mathematical> > > equation.> > > > >
> > > You may ask why backtesting to 1985 (or any other date) is
> > important.> > > > There are dozens of reasons,
but the most important reason to me > > is that> >
> > prospective investors in any funds that I manage want to see how
a> > > proposed> > > > system would have
performed over a statistically meaningful period> > > of
time.> > > > You can argue about the relevance of such
information, but THEY> > > EXPECT TO> > > >
SEE IT. For the record, I also think that it is very
important.> > > > > > > > I welcome
comments from anyone with an interest or knowledge in > >
this> > > area.Send
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