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Revolutionary ideas regarding the market and system optimization

  • #21
  • Apr 16, 2007 4:10am Apr 16, 2007 4:10am
Quoting aicccia
I'm saying, if a system is really just curve-fitting randomness, then changing the period just slightly that you optimize it over will give you completely different settings.

If it's robust, you can optimize the system over several different periods and still get similar settings.

That it how you tell if a system is curve fitting. To say a system is curvefitted simply because the data sample was months instead of years is inaccurate.
Yes and so far the best system that i found that does this is trendlines.

regards
jest
  • #22
  • Last Post: Apr 19, 2007 4:03pm Apr 19, 2007 4:03pm
Quoting aicccia
Hey let me just say somethings that I've been thinking the last few months and see what everyone's idea is of them.

~ The market is made up of huge waves, shaped like sine or cosine waves, that last 2-9 days.

~These waves are slowly but constantly changing shape and size.

~Since these waves are constantly changing shape and size, fitting a system to several years worth of waves is completely counter-productive.

~It's much more productive to optimized a system to the current shape and size of the currencies wave.

~According to my research, the optimal length of time to optimize a system to the currency wave is just 4 months.

~This means that if compared with the market four months ago, the market now would look very different; and indeed it does.

~This is because 4 months is the time it takes the market wave to completely change shape.

~This is also why it's very very difficult to optimize a system over years of market data. It's like trying to find only one change of clothes to wear the whole year, for every season and event.

One thing to note is all this research was done on the hourly GBP/USD. But from glances at least other currencies, the principles seem to hold up. I believe the principle is there on other timeframes, it's just much harder to see.
Hi - this is my first post here, so my apologies if I do anything unwarrented; I stumbled across it by accident and poked around. Looks interesting (especially as I am very fond of Metatrader).

Anyway, for fine tuning your systems automatically, you might want to look up Optimization and Control theory, particularly Kalman filters, if your maths are up to it. (You should have some familiarity with calculus/statistics/linear algebra). If you want to work in the frequency domain, there are math techniques that are a little complicated but will track dominant frequencies as they evolve over time. You might want to look up "passive tracking" and "lofargram" on the web - the last is an intensity plot that displays frequencies, like you see in a movies about submarines (The Hunt for Red October has som great shots of them). The one's known as "alpha-beta" trackers are probably the easiest to implement.

But in general, control theory - using information from errors in estimates to update and correct your system - is very much a part of modern technology; it pops up everywhere from financial quants to steam valve controls to keeping planes in the air.

Good luck (and sorry about the delay in responding);
CB
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