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Fred,
I don't compound the number of positions... I work pretty diligently
at filtering down my trading system(s) to generate a reasonable number
of trades that I can either afford or am comfortable in taking.
When more trades are generated that I am comfortable with, I simply
pick and choose from among them in order to accomodate my mkt exposure
comfort level.
Phsst
--- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> Phsst,
>
> 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.
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