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Strategies & Market Trends : Technical Analysis- Indicators & Systems
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To: Bob Anderton who wrote (3203)12/6/1998 4:10:00 AM
From: Richard Estes  Read Replies (1) of 3325
 
I will try to drop in and talk system testing. But the first thing you need to know is: System Tests do not model reality, their prime use is to compare the relative differences between systems. No, we don't continue to invest the profits back into the same stock in real life or buy/sell at open. But since all systems are subject to the same measures, it is comparable. You are trying to find the best system that meets your mindset. Humans don't maximise profits, they optimise them in keeping with mindset.

I responsed to Peter's post with a little tounge in cheek, thinking that he may have made an error in his computations. That type of return would beat all the supposed "established firms".

The first item, I look at is avg length of trade.. we all have an idea of how long we could stay in a trade. Next you want to know about drawdowns, how low would my capital go during a trade can I live with this? MSWIN has MAE measure of the lowest point during a trade that the stock went down to during the trade.

Its late. WOWPro allows testing on muti-stocks. Mswin requires you to test one at a time, but has better reporting. 5 years of data is minimum amount for a good test. Always use the same amount of money, and other settings for all tests for comparsion. I suggest 10,000 and buy/sell next day at open after signal. Write a book, if handled right you can sell 500,000 copies or more. Assuming 10% return on a $50 book, you get 2.5M for a few weeks work. That should help your trading capital. I would give the 90% to the people that gets the numbers of sales in that range gladly.
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