Tick interval selection and optimization

[JangoFolly]

I have an automated intraday strategy that I'm currently backtesting on 9 months of level-one tick data for the mini-Dow. It’s a triple timeframe (or, in this case, tickframe) approach à la Dr. Elder with x, y, and z ticks per period, and I’m using canned indicators (MACD, Williams %R, EMAs) with non-standard parameters. This system is very similar to my normal discretionary approach for trading the YM, which has been moderately successful to date. I have done some tweaking of the indicator and parameter combinations which constitute an entry setup based on my testing, but I’m not too far from where I started and I’ve tried to keep the tweaks as general as possible to avoid over-fitting my model to my test data. I am, however, a little concerned because my results change dramatically for the worse when I change the values of the three tickframe intervals. As I mentioned before, these tickframe values are based on a successful discretionary approach rather than having cycled through a range of values looking for the most profitable tick interval. On the other hand, I find it somewhat unlikely that my discretionary system just happened to utilize near-optimal tickframe values. I have also run automated system over a similar range of data for the mini-S&P, 10-year T-note, and Bund futures. None of the three resulted in a profitable system, but I’m less worried by that since each market has its own rhythm.

I do plan to get some additional YM data and test the model over a new range of data, as well as begin testing on live data in real time. I would appreciate any thoughts you have on this matter.

Thank you.


Regards,

 

[stephencrowley]

Perhaps you should use some sort of continuous time model.. e.g., the time between events is another parameter. quantatizing tick data is like putting a square peg into a round hole.

Quote from JangoFolly:

I have an automated intraday strategy that I'm currently backtesting on 9 months of level-one tick data for the mini-Dow. It�s a triple timeframe (or, in this case, tickframe) approach � la Dr. Elder with x, y, and z ticks per period, and I�m using canned indicators (MACD, Williams %R, EMAs) with non-standard parameters. This system is very similar to my normal discretionary approach for trading the YM, which has been moderately successful to date. I have done some tweaking of the indicator and parameter combinations which constitute an entry setup based on my testing, but I�m not too far from where I started and I�ve tried to keep the tweaks as general as possible to avoid over-fitting my model to my test data. I am, however, a little concerned because my results change dramatically for the worse when I change the values of the three tickframe intervals. As I mentioned before, these tickframe values are based on a successful discretionary approach rather than having cycled through a range of values looking for the most profitable tick interval. On the other hand, I find it somewhat unlikely that my discretionary system just happened to utilize near-optimal tickframe values. I have also run automated system over a similar range of data for the mini-S&P, 10-year T-note, and Bund futures. None of the three resulted in a profitable system, but I�m less worried by that since each market has its own rhythm.

I do plan to get some additional YM data and test the model over a new range of data, as well as begin testing on live data in real time. I would appreciate any thoughts you have on this matter.

Thank you.


Regards,

 

[fader]

(1) "As I mentioned before, these tickframe values are based on a successful discretionary approach rather than having cycled through a range of values looking for the most profitable tick interval." - i see your point, but i would also guess that in your discretionary approach you must have tried a few different tick intervals before it worked... it's unlikely that you have just picked them in your discretionary and they worked immediately.. - so still you may have "fitted" these timeframes in your discretionary approach although you did not go through the more rigorous testing that you are doing now.

(2) 9 months of data is not sufficient in my opinion - especially because you can't use it for forward testing since your parameters seem to be fairly locked - i backtested a lot using 4 years worth of data and found that most if not all strategies' performance goes through cycles (which correspond to the cycles in market behavior) - the cycle length can be a few months at least or much longer - i.e. your current backtesting period may be covering a market cycle which is particularly favorable to the behavior your strategy is trying to capture (fyi i did not backtest with tick data, only intraday minute data)

(3) actually i may overlook the comments above if you told me you have traded this approach discretionarily for 10 years (or X many years) and this system is a very close replica of it... - i guess in this case you are just mechanizing something that you know has worked consistently for a long time.. - that's a different matter.

(4) on the other hand, i can agree that the short-term behavior of the other markets you have tested, i.e. ES,bonds,bund etc. is distinctly different from YM - these other markets are awash in liquidity and there are not as many deviations from the equilibrium levels - i can suggest you look at a comparable instrument, like the DAX futures for example or ER2 and see the performance might be more similar.

(5) whatever you do, you must have a very strict plan for stopping/re-evaluating/re-working the system if it starts performing below your backtested results.

all the best.

Quote from JangoFolly:

I have an automated intraday strategy that I'm currently backtesting on 9 months of level-one tick data for the mini-Dow. It’s a triple timeframe (or, in this case, tickframe) approach à la Dr. Elder with x, y, and z ticks per period, and I’m using canned indicators (MACD, Williams %R, EMAs) with non-standard parameters. This system is very similar to my normal discretionary approach for trading the YM, which has been moderately successful to date. I have done some tweaking of the indicator and parameter combinations which constitute an entry setup based on my testing, but I’m not too far from where I started and I’ve tried to keep the tweaks as general as possible to avoid over-fitting my model to my test data. I am, however, a little concerned because my results change dramatically for the worse when I change the values of the three tickframe intervals. As I mentioned before, these tickframe values are based on a successful discretionary approach rather than having cycled through a range of values looking for the most profitable tick interval. On the other hand, I find it somewhat unlikely that my discretionary system just happened to utilize near-optimal tickframe values. I have also run automated system over a similar range of data for the mini-S&P, 10-year T-note, and Bund futures. None of the three resulted in a profitable system, but I’m less worried by that since each market has its own rhythm.

I do plan to get some additional YM data and test the model over a new range of data, as well as begin testing on live data in real time. I would appreciate any thoughts you have on this matter.

Thank you.


Regards,