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If I understand your systems correctly, I wouldn't call them parameter free. They are more like locally fit models I think. The potential pitfall of locally fit models is that you have bad estimation of the parameters and there is no statistical significance of those estimates. The problem with...

I might add that a potential reason why such streaks last longer than one might expect is may be because of all the curve fitters out there?

Yes, that would be like mean reversion -- it is likely to work especially for insignificant systems but you just never know when that streak will end.

Or here is another approach: take a well worn strategy, then slightly improve one of it's aspects and hope you can extend the window of opportunity (i.e., until everyone else starts using that updated algo). Perhaps using an LPF is potentially an example like this since perhaps not many are...

If that's the case, then the issue is not so much curve fitting (i.e., fitting to a pattern that is not really there), but rather is one of dealing with a finite window of opportunity. In that sense, trading is like any other business, except that the window of opportunity is a lot shorter than...

Yes, of course, but the eternal hope of all financial alchemists is that the perfect combination of slightly different tools may one day turn our charts into gold.

two words: curve fitting -- if in fact all you can do is curve fit, then your sharpe ratio and profit factor and risk reward will be out of this world by creating a following compared to trading.

Notice the very key word *almost* which keeps things perfectly legal. Okay, may be you are not directly selling them, but there are other ways to monetize once you have a big following (see google or facebook for examples). I might sound a little sarcastic, but I am quite serious and I have...

By the way, I believe what you are doing is the smartest thing to do with regards to trading: sell tools that *almost" promise a dream. There is very little risk involved. There is little to no regulation to worry about. Low starting capital, just need the know-how (education, preferably...

Okay you revealed your motive for this thread. Nevertheless, I can see some things from the site that I can use, e.g., dominant period, high pass to remove trend. I will also give the second order LPF a try. Thanks!

You mentioned statistics a number of times, but I believe what's more important than statistics is statistical significance. I think what cooltrader is saying is that you can't really prove statistical significance of those patterns, even though the statistics appear to indicate a tradable...

I think there is a confusion here with the word "forward test". I believe what you are doing is training your system on a rolling window of data, then running your model "forward" without retraining to check the performance on "future" data that hasn't been trained on. The "future" data of...

Of course, this is the age old problem. You have to raise your target. But guess what, when you do that your win rate goes down. So you lower your target, guess what you dip below the vig. In the end, you have to up your win rate with higher targets. That's the name of the game. All I'm saying...

okay, it sounds like you know what you are doing, but I am not fully convinced that a first order RC filter (aka EMA) is so much worse than a second order one. But it could be true.

what is a "standard" low pass filter? what kind of response curve does it have? are you sure there are no windowing artifacts resulting in a sinc like response? are you using an FIR filter?

Right, all EMAs and SMAs are low pass filters as well.

yes a profitable strategy should be simple but more importantly it must not be obvious.

Okay, I didn't realize there was free lunch available.

Not all day traders are scalpers. Some of my best strategies make one or two trades per day, but always close out eod. Most (not all) of those are still overwhelmed by commission + slippage.

I am pretty sure every back tester has found lots of strategies (10s or 100s) that make money consistently without slippage and commission (myself included). The minute you add those costs, you will see every single one of them will become money losers. Then you will go on an extended journey to...