RE: WALK FORWARD OPTIMIZATION - Open position management around the trade / optimization window ??

[Jim Mann <mannjt@xxxxxxxxxxxxxx>]

Mark,

Please read Dennis Meyers articles in TASC and buy Bob Pardo's book on optimization.

Jim

-----Original Message-----
From:	mark.keenan@xxxxxxxxxxxxxx [SMTP:mark.keenan@xxxxxxxxxxxxxx]
Sent:	Wednesday, October 16, 2002 1:53 PM
To:	omega-list@xxxxxxxxxx
Subject:	WALK FORWARD OPTIMIZATION - Open position management around the trade / optimization window ??


I am a little confused on the following PRACTICAL  issue and have not seen
it addressed in all the books written on System Robustness and
optimization.

Assume the following basic system:

Buy on a close above a EXP moving average -
Sell on a close below a EXP moving average -
The system is always in the market unless a fixed percentage stop is used.

My question is essentially the following and am very interested to know how
people handle this issue..


I will be using the following methodology :

Optimize over 4 years
Trade the Optimized parameters over the next six months
Shift the 4 year optimization window up my six months (my traded window)
Re- optimize and trade the new optimized parameters over the next six
months

Keep repeating..



Assume I test 4 years of data and arrive at an optimal value for my average
as 20

I the trade the next six months ion real time with my 20 average

I have a few good trades during my six month window and at the end of the
six months I am STILL IN A TRADE, say initiated two weeks before the six
months was up.

I shift my optimization window forward to encapsulate the recent 'traded
six month' , optimize my 'new window' and arrive at optimal average of 25

What do I do - I am still in a trade from the previous six month window
using a 20 average - My recent 4 year optimization window has now told me
the optimal average is 25 and further more I should have taken a trade a
week ago using the 25 average.


How are open trades managed around optimization windows??

I have thought of optimizing whenever I close a trade out, but then what
happens of the new parameter says i should have initiated a trade while I
was still in a the old trade.??

Help and advice would really be appreciated
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