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RE: Switch between systems


  • Date: Sun, 23 Aug 2009 02:29:32 +0200
  • From: "Pierre Orphelin" <pierre.orphelin@xxxxxxx>
  • Subject: RE: Switch between systems

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Hi,

You are  right when   using a   few   classical  systems  that will  have
unpredictable equity  curve  behavior   because they  only represent an
approximation that often   works more by  chance than  anything else ( the
case is  general  for   any  false  science,  what  technical analysis is).

This  is  less  true  with   more  sophisticated adaptive  system (
neurofuzzy  logic  base   for example)  that have   thousands  of  rules and
that  may better adapt to  unknown market  condition). They  will  fail
some day and  encounter some  drawdown,    but  probably later  that
classical  hand  coded   EL   systems.

This is  where  the  difference resides , and  the slightly    better
stability of  the equity curve of  neurofuzzy  systems,  when allowed to
compete together, allow  to get  a   valid results  when  swapping the
systems,  the small   winning  equity curves are detected  sooner ( or  will
last  longer) and  have a  better chance  when aggregated  to  produce  the
expected result ( we attempt  to  minimize  the  lag  for swapping detection
, increase  the   duration of detected winning trades sequence in this
case, otherwise  what  you said   will  occur  if  you  have  to  pay  twice
the  lag  of  the equity curves added to the  lag of  the  underlying system
themselves (what is  the  drawback of the  equity curve  trading).

It's   NOT   guessing since  we  have realized  this (  check the web  site
below)..
It  has  been  verified and  tested over years on multiple supports (
mainly  index  futures and  main  forex  pairs - range  bars in  this  case-
). 
The  stock  picking version will be ready  for September, coupled  with  a
TS  scanner to select the stocks.

Moreover   this   new approach  is  also a good  answer  to  the usually
annoying questions : 
-When should  I stop   the  system(s)
- What   should  I  do  now  ?

... Because  the systems are  permanently swapping and  the   losing
systems are  quickly  discarded (  the  1000  candidates are  evaluated in
real time), so there is always  something to do with the   latest   best
sorted  candidates.

Useless to says that  this  works  with a   managed  portfolio  of several
lines (even small  ones,  but 10 in a  minimum IMHO, although  even 1 or  2
produce  better  results than a single  sytem.

Sincerely,

Pierre Orphelin
www.sirtrade.com
16th year  of  automation in trading system development



-----Message d'origine-----
De : DH [mailto:catapult@xxxxxxxxxxxxxxxxxx] 
Envoyé : jeudi 20 août 2009 04:10
À : Omega List
Objet : [english 100%] Re: Switch between systems

I'm with Gary. Dynamically switching between systems is too little too 
late. By the time you see the system failing and switch away, you've 
already lost too much. An alternative is to do size ~ (sharpe-ratio)^2 
among the systems.

-- 
   Dennis