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The typical techniques for trading system creation and validation

pranasblk | 2008-05-02 | Investavimo ABC | perskaitė: 1878
The typical techniques for trading system creation and validation The typical techniques for trading system creation and validation

The topic below describes typical techniques for trading system creation. Everybody who is interested may Google terms mentioned for better understanding:

* Trading models should be checked for statistical validity. In statistics ability of model to adjust to data sample without predicting power is know as degrees-of-freedom (equals to data sample). The formula exists in deriving impact of optimization inflated correlation (R) given the true correlation (RC) for model with P number of parameters and data sample N

R = SQRT(1-((N-P)/(N-1))*(1-RC^2))

Such model is not precises for trading system model with non linear regression or classification models, but brigs the picture how over optimization may negatively impacted if system has large number of parameters and rules and small data set.

* Besides analytical approach in estimating trading system degradation because of increased degrees-of-freedom the practical data mining validation approach is used for checking system performance with out-of-sample usage the principle is also know as walk-forward testing.

* Even if model's Degrees Of Freedom is constrained, it is tested with Out Of Sample data sets and shows positive results the sufficient number of trades should be collected for estimating average behavior of model outcomes (results from trades). The statistical term is know as The Law Of Large Numbers. e.g. The confidence in estimated profitability figures of trading system with > 400 trades are much greater comparing to 20 trades.

* The output of model should be critically evaluated by applying simulation of system trading with warring parameters. The method is known as Monte Carlo method.

* Even simple model optimization with huge amount using brute force algorithms requires lot of computational resources. The global optimization algorithms such as Genetic Algorithms provides the better way of achieving better results with less computational resources.

* Besides checking characteristics of each system individually, the portfolio of systems is validated. The Modern portfolio theory can be applied for combining different trading systems into portfolio. The leverage of different systems may be combined to get efficient frontier (optimal for testing set risk adjusted reward) portfolio. The portfolio is created from small number of systems with outcomes negative and/or very low correlations. Such approach is supported both by analytical analysis and practical production ability in monitoring stability of small covariation matrix over long period.


Thanks for reading,
pranasblk

Translations and notes are welcome!

P.S. The post is based on my promise to Spekuliantai group stake holders. I guess everybody who want to achieve some results in this particular are should know English

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Pagrindiniai prekybos CFD principai

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2014-05-14 | Investavimo ABC 2014-03-04 | Investavimo ABC 2014-01-13 | Investavimo ABC 2013-12-16 | Investavimo ABC

Komentarai



2008 05 05 10:44     #3350
sounds very promising
2008 05 05 12:28     #3351
Mindzio, galėtum pasidalinti savo patirtimi Kažkada esi minėjęs, kad reikia žinoti ką, kaip, kur reikia testuoti. Tai gal kokį real input padarysi?
2008 05 05 22:35     #3352
negi lietuviams jau lengviau svetima kalba rasyt, ar sunku isverst
2008 05 06 09:01     #3353
maniau, kad ir komentarus anglishkai rasysit, klydau ;D
2008 05 07 06:54     #3354
Na, turejom guys, kurie rase every second zodi in English, dabar jau turim ir a whole article. Nesistebiu.. :/ Beda ne tame, kad man butu sunku skaityti angliskai (is tiesu, dauguma terminu net labiau iprasti anglu kalboje, nei lietuviu), o tame, kad anglu kalba yra prikurta begale forumu ir straipsniu - tik skaityk i valias. As i spekuliantus del to ir uzeinu, kad galeciau man idomia tema pabendrauti lietuviu kalba.. Be to ir straipsnio anglu kalba neblizga ypatingu taisyklingumu (pvz, "Such model is not precises<..>" - kam ta "s" raide gale? Arba "<..>are should know English" straipsnio pabaigoje).. Zodziu, pats nesi anglu kalbos asas, rasai lietuviams lietuviskame saite, tai kokio velnio apsunkinti sau ir kitiems gyvenima rasant angliskai?
2008 05 07 11:32     #3355
kafka, mielai pasidalinciau bet deja sekasi labiau "daryti" nei rasyti. Be to mano anglu k. labai silpna. Siaip jeigu idomu uzmesk aki i mano paskutini darbeli: http://64.22.73.42/GO_c_Study.doc
2008 05 07 17:49     #3357
Nesuprantu kam juokint zmones. Tekstas panasus i rusu->anglu vertima PROM't o pagalba. Manau, autoriui pries rasant straipsnius reiketu siek tiek pasimokyt anglu kalbos.
2008 05 07 22:35     #3359
Uz komentarus del sintakses ir pan. aciu. Reikes taisyti Kaip suprantu turinys niekam nerupi Ir toliau zmones ims MT4 kurs sistemas kur bandys apieiti beveik kiekviena treida idedami nauja formule ir bandys "prekiauti" Nes kiekvienas atskirai moka geriau uz kitus kartu paemus tai daryti.
2008 05 08 00:06     #3360
Pranai. Nesuprantu ko tu stebiesi. Daugelis is prigimties linke buti loozeriais. _o
2008 05 08 09:29     #3361
pranasblk nesupratau tavęs, kokios dar diskusijos lauki dėl turinio? Čia viskas aiškiai angliškai parašyta, o kur neaišku wikipedioje gali rasti dar neaiškiau
2017 05 10 19:56     #36661
 We are loving the way to get the trick how to hack clash royale game online and you have been getting the gems and gold for the game here.

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