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Hi Dirk
The System Tester is able to access future information in the same way that an indicator can, so the ZigZag-based functions such as Peak() and Trough() also cheat on all but the last bar of data (by looking ahead at future prices). There are uses for such unvalidated signals (peak, trough etc.), and being part of a reliable mechanical system is NOT one of them.
Unless you're using Spyros' tools there are only two ways to validate a peak or trough. One way is to measure the percentage of movement since the supposed peak/trough (which is what Spyros' tools do), and the other is to use a new tentative peak/trough as confirming the previous trough/peak.
I'm not sure what you mean by "Tester leaves a lot of bad signals". The System Tester does pretty much what you code it to do, and depending on how you set it up of course. Failed trades are usually caused by improper or inappropriate settings, not because the System Tester is somehow not working properly.
A common mistake is to allocate 100% of capital when a trade is evaluated on the setup bar, and then expecting the trade to execute on the next open when the OPEN price of the entry bar is higher than the price of the setup bar. With this situation the EST calculates the number of shares to purchase while evaluating the trade on the setup bar, and then on the entry bar it discovers that 100% of capital is insufficient to buy the calculated number of shares. No prizes for guessing what happens then - the trade is cancelled of course.
One easy way around this particular issue, and there are others, is to delay the formula in the Buy Order window with Ref("my entry",-1) and eliminate any non-coded delays (Strategic or simulation delays). This allows the EST to evaluate and execute the trade on the same bar. Another simple work-around is to double the amount of capital and only apply 50% to each trade. etc. etc.
I suggest that you download Tom Sprunger's document on the EST from the Files section and read it. That will give you some idea of EST "problems" and possible solutions.
Regards
Roy
----- Original Message -----
From: dirk_boodts
To: equismetastock@xxxxxxxxxxxxxxx
Sent: Tuesday, November 13, 2007 10:18 AM
Subject: [EquisMetaStock Group] Re: Make 'trustful' Peak/Trough levels
Thanks for the answer. Indeed, once the turn is confirmed it should
be ok. But why the System Tester doesn't take this into account too?
Now, the Tester leaves a lot of bad signals, altough it was a valid
cross of the CLOSE with the PEAK. I think it is because the system
buys only the next day. Maybe I should buy at the close of the
signal bar instead of the next open. That's possible but i don't
know how to formulate it in the tester. You know this by heart?
rgds,
Dirk
--- In equismetastock@xxxxxxxxxxxxxxx, superfragalist <no_reply@xxx>
wrote:
>
> As I remember it, the last time I heard from Spyros he wasn't using
> anything to do with the zig zag, including the ZZ, etc.
>
> Dirk, probabilities are the issue. When a peak or trough signal is
> validated, all it means is that the price has changed direction
enough
> so that the direction change signal is stable. It says absolutely
> nothing about the probability the stock will continue to rise or
fall.
>
> Once you use a validated zig zag signal, it stops the zig zag from
> picking the bottom or top in hindsight. That means that from the
point
> of the turn to the validation signal, the price required to meet
the
> validation percentage is not part of the trade profit. That changes
> the performance of the zig zag function dramatically. Test it and
> you'll see.
>
> You can use the validated zig zag signal like a filter as part of a
> trading system, but it's not a great filter. At least that's been
my
> experience.
>
> Spyros has a series of articles on the zig zag in Stocks and
> Commodities. He spent a lot of years working on the zig zag.
>
>
>
>
> --- In equismetastock@xxxxxxxxxxxxxxx, "dirk_boodts" <etrader@>
wrote:
> >
> > Thanks, this is very useful to find out if the latest turn is
> > definite or not.
> > The formula: cross(c,peak(1,c,5%) Should work because when the
> > close is back up, it means that a trough is made and so the last
> > peak is surely definite. (correct me if i'm wrong).
> >
> > The problem tough is that if the next close (bar) is not above
the
> > peak, then the expert advisor takes away the signal.... :-(
> >
> > Why is this? And is there something to do about it.
> >
> > rgds,
> >
> > Dirk
> >
> >
> >
> >
> >
> > --- In equismetastock@xxxxxxxxxxxxxxx, pumrysh <no_reply@> wrote:
> > >
> > > Spyros Raftopoulos did a good deal of work on this and has a
> > > validating indicator. Check the files for ZZ indicators...3
files
> > all
> > > total.
> > >
> > > Preston
> > >
> > >
> > >
> > > --- In equismetastock@xxxxxxxxxxxxxxx, "dirk_boodts"
<etrader@>
> > > wrote:
> > > >
> > > > The Peak/trough indicator is very interesting but as you all
> > know,
> > > > one should avoid it when using in a system because it's
> > hindsight.
> > > >
> > > > Although, I tought that Peak(1,C,5) must work (trustful)
once
> > the
> > > > stock declined enough from that peak en rises again. With
other
> > > > words, once the trough(1,C,5) is made, then the Peak(1,C,5)
can
> > be
> > > > used in a system, no..?
> > > >
> > > > I tried and yes indeed, once the close is back at the peak
level
> > it
> > > > means that the stock made a low and the peak will not change
> > > anymore.
> > > > (am I correct?)
> > > >
> > > > THE PROBLEM tough is that in realtime after giving a signal -
for
> > > > example: C > Peak(1,C,5) - the next bar closes beyond the
Peak
> > > and
> > > > the signal is gone. If the next bar is closer higher, the
> > signal
> > > > stays valid and we have a good signal.
> > > >
> > > > Any comments? How can we solve the problem that the signal
> > doesn't
> > > > dissapear the next bar?
> > > >
> > > >
> > > > rgds
> > > >
> > >
> >
>
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