Search results

That may be the case, but it certainly is not the ratio of bull <b>days</b> to bear <b>days</b>. I don't see any relevance with your comment of bull years to bear years? Interesting statistic, fan27. Thanks. -Eric

Very good point. The more non-Gaussian (non-normal or non-'bell-curve') your P&L data is, the less accurate the results of this analysis will be. I find that it can still be useful data, while perhaps being 'flat-out wrong' in a rigorous statistical sense. Don't forget that the goal is to...

You are 100% correct. Your numbers are correct. I quickly input the six numbers into an existing Excel spreadsheet, and apparently the first four numbers were formated as text, or labels, so when I did the Std Dev calculation, it only based it upon the last two trade values. Thank you for...

Your score will only increase if your average stays the same and your standard deviation stays the same. That said, you are correct, if the average and standard deviation remain unchanged, as you add more and more data points into the picture, these data points rightfully further solidify your...

I think you both have the right idea. I am talking about the standard deviation of the profits from the trades. Using the first example posted: +$2000 +$350 ($300) +$1400 ($3000) +$750 And plugging into Excel for STDEV, I get a standard deviation of $2652. Also, you could use the...

Hmmmm. Good question. Hopefully, someone will have a link or book recommendation for us. Acrary's recent thread has some very good information, in case you missed it. -Eric

Microsoft Excel has a function for the Standard Deviation. STDEV(a1:a51), for example to calculate the standard deviation for the numbers in cells a1 to a51. Many calculators also have a function for this, and I'm sure you can search the internet for the actual equation for calculating the...

I consider each trade to be an independant event, regardless of whether it is 200 shares or 1500 shares. I think it would still be worthwhile and useful for you, although I would avoid the word 'valid,' as this might imply a sense of statistical accuracy that we do not have or require for our...

As abogdan pointed out, determining when to activate and deactivate a trading system really becomes a system within itself. My choice has been to develop a very simple method that will shutdown a trading system when I 'lose confidence' in it (statistically), and activate a trading system when...

Let me point out that these calculations were designed for series of data that have a Gaussian distribution (i.e. 'bell curve' distribution). Is this true for our typical stock trade P&L's? Heck no, not even close!! 'Fat tails' from the occasional large stop loss, for example, will make...

Is my system profitable? At what level of confidence? Assuming we are using 'future' data (whether this is backtested future data or actual forward tested data doesn't matter), then we can use statistical analysis to our data to determine the likelihood that our system is a profitable system...

I completely agree, abogdan. That is why (for me), it is critical to have a structured approach in place that is completely free of any emotion or judgment. Instead, my systems automatically turn themselves on and off as appropriate based upon my system activation/deactivation 'system'. A...

For me, the question of system activation really depends on answering the question of "Is this system profitable?" Obviously, once activated, money management can be used to determine the best trade size in order to minimize drawdown on your overall account. So, how do we know if our...

First, before I forget, let me address one of the biggest mistakes people make when developing a system: optimization. Typical traders will take a program like TradeStation or WealthLab or the equivalent, and create a spectacular trading system with clever and creative ideas, which has a...

When reseaching a trading system, at some point you must make a decision about whether your new pet system is 'worthy' of activation. Similarly, once activated most trading systems will, at some point, go through one or more periods of poor performance and you must determine whether this is...

Hmmm, I guess it depends on how you look at the question. I believe that you can profitably trade 'noise', at least as I define noise. Your example of rolling a single dice is a good example. The 'price' will range from 1 to 6 randomly. I will choose to 'short' at 5, double up my short...

Thank you very much for the ongoing sharing of your thoughts on systems development. It has been very helpful and is very much appreciated. I'm hoping you might have thoughts on the following question. I use automation to trade individual stocks, and use systems on many different stocks...

In order to get a direct connection to INET and/or ARCA, you first need to be a broker dealer (to have an ID that your trades can be cleared against). Then, you will need to pay the month connection fee, which covers the T1 connection, routers, etc. I believe this fee for Island is now up to...

Acrary, You are one of the top three most respected posters on ET, in my opinion. I look forward to the progression of this thread, and hope that I might be able to contribute to the discussion in some useful way. Thanks, -Eric

Certainly there are differences. However, the value of peer review recommendations for both are equally well founded. Would you suggest that the Nobel Prize is also a worthless judge of merit, and that the thought from economics and physics professors at every local community college should...