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Taking a Trading System Live


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Taking a Trading System Live

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  #131 (permalink)
Legendary Market Wizard
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Big Mike View Post


I think it's quite a bit better. But not free...

Mike


I have never used the product above, but Mike Bryant has some other good tools, for free (through his newsletters) and for pay. He has some very good ideas on trading system development.

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  #132 (permalink)
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Kevin,

Excellent thread. Thank you.

In response to a question about your approach to optimization you wrote the following:


Quoting 
One thing I have noticed with WFO is that a lot of times ANY combination of IN/OUT periods will work. Most times, though, I tend to like to keep them to simple intervals (ie 4 years in, 1 year out). I'll use a varoety of tools to determine my IN/OUT (it is generally different for different strategies).

Could you say a bit more about the tools / decision making process you use to make decisions about the IN/OUT periods you use?

I'm afraid of optimization.

thanks,
RK

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  #133 (permalink)
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rk142 View Post
Kevin,

Excellent thread. Thank you.

In response to a question about your approach to optimization you wrote the following:



Could you say a bit more about the tools / decision making process you use to make decisions about the IN/OUT periods you use?

I'm afraid of optimization.

thanks,
RK

Yes, I will answer this question. I might just take a little while, because it is an involved topic, and I'll need to create some coherent thoughts...

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  #134 (permalink)
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I always try to include a bull and bear market in each set, with at least 20% for the OOS set.

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kevinkdog View Post
Yes, I will answer this question. I might just take a little while, because it is an involved topic, and I'll need to create some coherent thoughts...

You may have answered this, but what tools do you use other than TradeStation and Excel?

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  #136 (permalink)
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Quoting 
I always try to include a bull and bear market in each set, with at least 20% for the OOS set.

Thanks Mike. Those are definitely helpful guidelines.

So right now I have a strategy which is simple, based on solid market principles, and is profitable over a large range of parameters (just one parameter in the strategy). I've exposed it to half of my data set during development, and hardly altered the strategy at all from its original conception.

My inclination is to keep it simple and just pick a parameter in the fat part of the "good region" to work with. But I'd also like to up my game and see if I can incorporate a KevinDog style WFO.

The issue is that I'm not sure how to begin making a choice of IN/OUT periods that is intelligent but doesn't involve that extra layer of potential curve fitting that Kevin mentioned. I'm thinking of picking my periods based on trade frequency (trying to get n-trades in each IN period) - or I could just through a dart.

-RK

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kevinkdog View Post
I have never used the product above, but Mike Bryant has some other good tools, for free (through his newsletters) and for pay. He has some very good ideas on trading system development.

I looked at his Adap Trade stuff. What turned me off is it's for TradeStation (EasyLanguage) only, and given my falling out with MultiCharts I don't want to go back down that path.

I also could not tell what type of machine learning he was really using. Maybe @NJAMC could view his youtube videos and make a guess. My best guess was it is not the type of ML that @NJAMC is working on, or that Wave59 has, but instead just a Genetic Optimization type formula.

I was also a bit turned off by the "brute force" method of the app, basically trying all kinds of crazy indicators to find a good fit. This clearly is a concern for overfitting....

Anyway, his MSA software is another matter, and I think is quite good for analysis.

Mike

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  #138 (permalink)
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rk142 View Post
Thanks Mike. Those are definitely helpful guidelines.

So right now I have a strategy which is simple, based on solid market principles, and is profitable over a large range of parameters (just one parameter in the strategy). I've exposed it to half of my data set during development, and hardly altered the strategy at all from its original conception.

My inclination is to keep it simple and just pick a parameter in the fat part of the "good region" to work with. But I'd also like to up my game and see if I can incorporate a KevinDog style WFO.

The issue is that I'm not sure how to begin making a choice of IN/OUT periods that is intelligent but doesn't involve that extra layer of potential curve fitting that Kevin mentioned. I'm thinking of picking my periods based on trade frequency (trying to get n-trades in each IN period) - or I could just through a dart.

-RK

No doubt Kevin will have a much more detailed answer for you, he is much more organized, detailed/methodical with this than I am, so I would wait for his reply if I were you...

I would just use a Monte Carlo for starters to examine the 90% percentile figures for drawdown and profit, and other metrics important to you. Don't just pick a set of parameters based on a single backtest without the benefit of monte carlo.

Doing a walk forward is good but I would save it for literally the last step, only because once you do it -- there is no "un doing" it, in other words what was once out of sample is now in sample. So make sure everything else is how you want it and avoid making changes to "tweak" the strategy after you hit the walk forward phase.

Then you want to do a live sim test, I think Kevin calls this "incubation" for a month or so and compare those results (all metrics, not just profit) to what your MC told you the 90th percentile would be, and make certain they are all inline with expectations. Then go cash!

Mike

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Kevin,

I have a random stupid system that I wrote today and was wondering, if I gave you the raw CSV trade file, would you work your magic on it? I'm talking about giving it the @kevinkdog run through and see what you think of it.

Personally, I think it's not any good, but hey what do I know! It's trading 100 shares of AAPL at a time, commission is factored in, and uses market orders, exit at cash close. No preset stop or target, it's always in the market.

Oh I should mention ignore the 1/1/2000, that is just what I type. NT isn't smart enough to actually list the first trade date there, lol. It's 5/1/2007 to current.

Here are some screens to whet your appetite... lol









NT7 based MC runs







Here is with 10% winning outliers removed, and you can see my concern now...



I went ahead and attached the trade report. Up to you if you want to spend your time on this or not, but I thought it might be fruitful to show how fast a system that initially looks good quickly falls apart under the microscope.

Mike

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Kevin, I hope you aren't mad at my numerous posts this evening. I haven't slept since Friday, apparently I have a new burst of energy tonight all the sudden.

I thought I would attach one more report, to make things interesting.

The prior post was optimized on my custom "Mike" fitness, which is a hybrid of a perfect equity curve, a measure of avg profit-to-drawdown ratio, looks for a well balanced long/short system (not lopsided), plus other things I can't remember.

Now in this post, here is the exact same system but optimized for Net Profit, which is what I assume 99.9% of NT users select by default

Notice the net profit itself isn't drastically different. But look at the total number of trades and the equity curve. Anyway, attached is the CSV for this bad boy as well if you want it. I would prioritize the last post first though.



Mike

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