By : stellataps19 | July 22, 2014

GBPUSD - FOREX : FOREX

1.70736 : 07/21/2014 : 1019 ET Change: -0.00113 (-0.07%)

Corrective Bull Mode
Report Type = Macro, End of Day


Free Proprietary Trading Signal Market Reports brought to you by StrategyDB.com


Categories that are currently turned on:
  • Market Behavior
  • Transitions
  • Standard Analysis
  • Advice
  • Natural Attraction
  • Support / Resistance
  • Price Projections

strategydb believe that standardized and repetitive analysis instills discipline in trading. strategydb lists major areas of interest that should be considered when performing technical analysis and / or creating a trading plan.

Market Mode of Behavior: GBPUSD : FOREX : 1.70736: Macro: Eight specific situations that dictate the current trading strategy...  

Currently, this market meets the Corrective Bull Mode criteria. Price is trending lower.

For the entire data set this market has been in Corrective Bull Mode 13.57% of the time.

The average number of bars spent in this Mode before transitioning normally = 10. Since the current number of bars in Mode = 2, this Mode of Behavior still has 8 bars to mature before meeting its average and possibly transitioning. Remember that this analysis is being performed on the bar interval.

The average price growth during this behavior is approximately = -0.01522. This is compared to the current price growth of -0.00253. Based upon the closing price of the most recent bar, price growth has yet to be met.



Transitions & Time: GBPUSD : FOREX : 1.70736: Macro: Some background on the current Mode of Behavior...  

Transition from Trending Bull Mode occurred 2 bar(s) ago. This transition occurs frequently.

Possessing knowledge of the preceding Mode of Behavior as well as the most likely subsequent Mode assists in executing current strategies, exits, and setting up for the next trade.



Standard Analysis: GBPUSD : FOREX : 1.70736: Macro: A closer look at the current Mode of Behavior...  

The current bar's close at 1.70736 demonstrates that prices should continue lower.

Cautionary price levels 0.86% below the market are outside the Average True Range price percentage window of 0.39%, currently lowering the short-term probability of transitioning out of Corrective Bull Mode .

The Average True Range price percentage window is simply a function of the 16 bar Average True Range, divided by the underlying's closing price of the last bar. Cautionary price levels are proprietary. Prices in this region indicate possible Mode transitions.

Volatility based on the 30 day standard deviation = 3.67%. Volatility based upon the 30 day Average True Range = 0.00662 points, (based upon the underlying's price scale.)

The price change versus 1 week ago = -0.00113. The price change versus 1 month ago = -0.00310. The price change versus 1 year ago = 0.05152.



Advice: GBPUSD : FOREX : 1.70736: Macro: Straight-forward wisdom on how to best be positioned for near-term profits...  

Alert! Transactions in FOREX, Futures, and Stocks, carry a high degree of risk. No slippage or commissions are included here or in our Statistics tables. Your FCM will charge you a commission.

Range trade this market from the short side. Sell rallies. Do not trend trade.

During Corrective Bull Mode short time-frame traders disagree with medium and longer time-frame traders. Brief pull backs are expected. (-++)



Natural Attraction: GBPUSD : FOREX : 1.70736: Macro: Notes the price that the underlying market is expected to tend towards...  

During Corrective Bull Mode prices should tend towards a point located at 1.66947.



Support & Resistance: GBPUSD : FOREX : 1.70736: Macro: This area of analysis generates specific trading levels or bands...  

A key level to watch is located at 1.67333 is exactly 0.03403 points or 2.0% away.


  • Trading Band1 Level = 1.71218
  • Trading Band2 Level = 1.70557
  • Trading Band3 Level = 1.69895
  • Trading Band4 Level = 1.69233
  • Trading Band5 Level = 1.68572
  • Trading Band6 Level = 1.67910

    Price Growth / Decay Projections: GBPUSD : FOREX : 1.70736: Macro: This area provides unique growth / decay projections...  
  • Target#1 =1.70198
  • Distance="0.00538
  • Move="0.3%
  • Target#2 =1.69144
  • Distance="0.01592
  • Move="0.9%

    Market Report End: GBPUSD : FOREX : 1.70736: Macro

  • Category :General 

    Tags :

    By : stellataps19 | July 22, 2014

    USDJPY - FOREX : FOREX

    101.386 : 07/21/2014 : 1020 ET Change: 0.066 (0.07%)

    Medium Bear Mode
    Report Type = Macro, End of Day


    Free Proprietary Trading Signal Market Reports brought to you by StrategyDB.com


    Categories that are currently turned on:  
    • Market Behavior
    • Transitions
    • Standard Analysis
    • Advice
    • Natural Attraction
    • Support / Resistance
    • Price Projections

    strategydb believe that standardized and repetitive analysis instills discipline in trading. strategydb lists major areas of interest that should be considered when performing technical analysis and / or creating a trading plan.

    Market Mode of Behavior: USDJPY : FOREX : 101.386: Macro: Eight specific situations that dictate the current trading strategy...  

    Currently, this market meets the Medium Bear Mode criteria. Price is trending lower.

    For the entire data set this market has been in Medium Bear Mode 9.02% of the time.

    The average number of bars spent in this Mode before transitioning normally = 12. Since the current number of bars in Mode = 19, this market may transition into a new behavior soon.

    The average price growth during this behavior is approximately = -2.210. This is compared to the current price growth of -0.576. Based upon the closing price of the most recent bar, price growth has yet to be met.



    Transitions & Time: USDJPY : FOREX : 101.386: Macro: Some background on the current Mode of Behavior...  

    Transition from Volatile Bull Mode occurred 19 bar(s) ago. This transition occurs frequently.

    Possessing knowledge of the preceding Mode of Behavior as well as the most likely subsequent Mode assists in executing current strategies, exits, and setting up for the next trade.



    Standard Analysis: USDJPY : FOREX : 101.386: Macro: A closer look at the current Mode of Behavior...  

    The current bar's close at 101.386 demonstrates that prices should continue lower.

    Cautionary price levels 0.52% below the market are outside the Average True Range price percentage window of 0.36%, currently lowering the short-term probability of transitioning out of Medium Bear Mode .

    The Average True Range price percentage window is simply a function of the 16 bar Average True Range, divided by the underlying's closing price of the last bar. Cautionary price levels are proprietary. Prices in this region indicate possible Mode transitions.

    Volatility based on the 30 day standard deviation = 3.45%. Volatility based upon the 30 day Average True Range = 0.365 points, (based upon the underlying's price scale.)

    The price change versus 1 week ago = 0.066. The price change versus 1 month ago = 0.070. The price change versus 1 year ago = -3.893.



    Advice: USDJPY : FOREX : 101.386: Macro: Straight-forward wisdom on how to best be positioned for near-term profits...  

    Alert! Transactions in FOREX, Futures, and Stocks, carry a high degree of risk. No slippage or commissions are included here or in our Statistics tables. Your FCM will charge you a commission.

    Range trade this market from the short side. Sell rallies. Do not trend trade.

    Place sell orders to establish shorts just below recent highs.

    During Medium Bear Mode longer time-frame traders disagree with short and medium time-frame traders. Medium-term banded ranges occur with a bearish slope. (--+)



    Natural Attraction: USDJPY : FOREX : 101.386: Macro: Notes the price that the underlying market is expected to tend towards...  

    During Medium Bear Mode prices should tend towards a point located at 100.087.

    A long-term price structure located at 100.087 is less than 1.3% away.



    Support & Resistance: USDJPY : FOREX : 101.386: Macro: This area of analysis generates specific trading levels or bands...  

    A key level to watch is located at 102.512 is exactly 1.126 points or 1.1% away.


  • Trading Band1 Level = 101.365
  • Trading Band2 Level = 101.000
  • Trading Band3 Level = 100.635
  • Trading Band4 Level = 100.270
  • Trading Band5 Level = 99.905
  • Trading Band6 Level = 99.540

    Price Growth / Decay Projections: USDJPY : FOREX : 101.386: Macro: This area provides unique growth / decay projections...  
  • Target#1 Hit @ 101.282

  • Target#2 =100.351
  • Distance="1.035
  • Move="1.0%

    Market Report End: USDJPY : FOREX : 101.386: Macro

  • Category :General 

    Tags :Forex Analysis 

    By : Matt | July 22, 2014

    EURUSD - FOREX : FOREX

    1.35228 : 07/21/2014 : 1025 ET Change: -0.00034 (-0.03%)

    Medium Bear Mode
    Report Type = Macro, End of Day


    Free Proprietary Trading Signal Market Reports brought to you by StrategyDB.com


    Categories that are currently turned on:  
    • Market Behavior
    • Transitions
    • Standard Analysis
    • Advice
    • Natural Attraction
    • Support / Resistance
    • Price Projections

    strategydb believe that standardized and repetitive analysis instills discipline in trading. strategydb lists major areas of interest that should be considered when performing technical analysis and / or creating a trading plan.

    Market Mode of Behavior: EURUSD : FOREX : 1.35228: Macro: Eight specific situations that dictate the current trading strategy...  

    Currently, this market meets the Medium Bear Mode criteria. Price is trending lower.

    For the entire data set this market has been in Medium Bear Mode 13.34% of the time.

    The average number of bars spent in this Mode before transitioning normally = 11. Since the current number of bars in Mode = 5, this Mode of Behavior still has 6 bars to mature before meeting its average and possibly transitioning. Remember that this analysis is being performed on the bar interval.

    The average price growth during this behavior is approximately = -0.01251. This is compared to the current price growth of -0.00954. Based upon the closing price of the most recent bar, price growth has yet to be met.



    Transitions & Time: EURUSD : FOREX : 1.35228: Macro: Some background on the current Mode of Behavior...  

    Transition from Volatile Bull Mode occurred 5 bar(s) ago. This transition occurs frequently.

    Possessing knowledge of the preceding Mode of Behavior as well as the most likely subsequent Mode assists in executing current strategies, exits, and setting up for the next trade.



    Standard Analysis: EURUSD : FOREX : 1.35228: Macro: A closer look at the current Mode of Behavior...  

    The current bar's close at 1.35228 demonstrates that prices should continue lower.

    Cautionary price levels 1.27% below the market are outside the Average True Range price percentage window of 0.32%, currently lowering the short-term probability of transitioning out of Medium Bear Mode .

    The Average True Range price percentage window is simply a function of the 16 bar Average True Range, divided by the underlying's closing price of the last bar. Cautionary price levels are proprietary. Prices in this region indicate possible Mode transitions.

    Volatility based on the 30 day standard deviation = 3.12%. Volatility based upon the 30 day Average True Range = 0.00431 points, (based upon the underlying's price scale.)

    The price change versus 1 week ago = -0.00034. The price change versus 1 month ago = -0.01688. The price change versus 1 year ago = -0.02343.



    Advice: EURUSD : FOREX : 1.35228: Macro: Straight-forward wisdom on how to best be positioned for near-term profits...  

    Alert! Transactions in FOREX, Futures, and Stocks, carry a high degree of risk. No slippage or commissions are included here or in our Statistics tables. Your FCM will charge you a commission.

    Range trade this market from the short side. Sell rallies. Do not trend trade.

    Place sell orders to establish shorts just below recent highs.

    During Medium Bear Mode longer time-frame traders disagree with short and medium time-frame traders. Medium-term banded ranges occur with a bearish slope. (--+)



    Natural Attraction: EURUSD : FOREX : 1.35228: Macro: Notes the price that the underlying market is expected to tend towards...  

    During Medium Bear Mode prices should tend towards a point located at 1.22474.



    Support & Resistance: EURUSD : FOREX : 1.35228: Macro: This area of analysis generates specific trading levels or bands...  

    A key level to watch is located at 1.36518 is exactly 0.01290 points or 1.0% away.


  • Trading Band1 Level = 1.36296
  • Trading Band2 Level = 1.35866
  • Trading Band3 Level = 1.35435
  • Trading Band4 Level = 1.35004
  • Trading Band5 Level = 1.34574
  • Trading Band6 Level = 1.34143

    Price Growth / Decay Projections: EURUSD : FOREX : 1.35228: Macro: This area provides unique growth / decay projections...  
  • Target#1 =1.34879
  • Distance="0.00349
  • Move="0.3%
  • Target#2 =1.33570
  • Distance="0.01658
  • Move="1.2%

    Market Report End: EURUSD : FOREX : 1.35228: Macro


  • Category :General 

    Tags :Forex Analysis 

    By : Matt | July 16, 2014

    Speculative gold longs have spent the past two days jumping ship. Monday’s washout started in Asian trading hours triggering automatic sell stops upon the Comex opening. Open interest in the futures contract has come off by a greater percentage than the price slide. This is understandable as the bullish factors that helped drive the spot gold price higher were being viewed as innocuous by many traders. The strongest and greatest price mover of the recent rally came from the   FOMC statement from June 18. How money managers will see rate changes over the next few months has overcome any geopolitical risk and European debt issues once more. At this point spot gold remains above trading levels on the day of that announcem...

    By : Matt | June 11, 2014

    Welcome to the Trading Strategy Kitchen.

    Today, we're cooking up some back-test success rice.


     

    Basic Problem:

    Given any financial time-series market data, it is   simple   to over-fit (curve fitting) a high-frequency, low frequency, investment, or other trading strategy, so that it performs well in-sample.

    How to overcome the delicious flavor of an over-curve-fit strategy? 10 Minute Success Rice!

    Simple Question:

    Are “optimal parameters” bad?

    Normally Accepted Solutions:

    • Hold out data or out-of-sample-data
    • Generate random scenarios
    • Model Sequestration

    Improved Solution(s) to Consider:

    Minimum back-test length (MinBTL) that an investor should require given the number of trials that the researcher use...

    Category :General 

    Tags :Back-testing 

    By : Matt | May 20, 2014


    Is it possible to apply any part of network theory, at a very high level, to technical analysis, and create an indicator or trading strategy around it?


    Power Law Overview –

    Network theory, hubs, nodes, and power laws can teach us much about the world.

    In the power law, the focus is on exponential functions, numbers squared, cubed or taken to the 10th power. These are common. Power laws are the opposite of mainstream basic statistical concepts. Normally accepted concepts - the idea that probabilities reveal themselves in the average distributions of bell-shaped curves is trumped by power laws.


    The stock market may be ruled by power laws. The bell curve may be a dangerous thing to bet on. Power laws teach us that there is a different ...

    By : Matt | May 05, 2014

    Professional longevity is something that is not easily accomplished. It takes character and vision. On a day-to-day operational level, it takes commitment. One must return calls, remain in touch, communicate, share, and basically stay in the proverbial game. Longevity means managing business relationships despite the many possible side-tracks that life would steer us onto. Not an easy feat, especially when talking, not just in terms of years, but decades; an entire working career for most of us!


    Whom does society demonstrate the most respect for, and call a career "X", or a veteran of "Y", or a true professional? Wealth certainly plays a part. But the newly rich aren't nearly as respected as those that have accumulated it long-t...

    Category :General 

    Tags :Matthew Goss Cimmino 

    By : Matt | May 04, 2014

    The United States' largest banks and banking executives are selling and departing, reducing risk. Are these warning signals that a market top or systemic risk is near? Traditional banking activities are back in vogue and all other businesses are for sale. Who's the lucky buyer? Here are the top 10 banks in the U.S. Let's take a look at some of their recent activities.


    The eight largest U.S. banks will have to hold another $68B in loss-absorbing capital after U.S. regulators voted to raise the "leverage ratio" to 5-6% of their total assets, well above the Basel III standard of 3%. The banks affected include JPMorgan ( JPM ), Citigroup ( C ), Bank of America ( BAC ) and Goldman Sachs ( GS ). The eight firms have until January 1,...

    Category :General 

    Tags :Matthew Goss Cimmino 

    By : Matt | April 14, 2014

    Differenet types of traders with varying investment time-horizons often forget to consider the range of the bars for the market under analysis.


    For technical analysis focused traders, many are familiar with average true range first introduced by Wells Wilder. The range is simply the size of a bar. The (High-Low) provides a simple arithmetic range measurement for any symbol, any asset-class. Range measurement may be undertaken by aggregating the market data and measuring. However, do remember that tick data has no range as it is the smallest increment that the underlying can trade in. But as soon as tick bars, second bars, 1 minute bars or longer are under consideration, measurements of the size of the price movement may be undertaken.


    Don't forget to analyze the range because it is a simple way for you to possibly improve your trading, system, or trading model. How?


    One way to go about this is to search within the library of indicators on the trading platform, and locate the range indicator or the ATR. Overlay the indicator on a chart to learn the average size of the bar under analysis. There's usually some look back period or smoothing performed. Quite often, the ATR will be 14 periods, with a variable input so that you may alter the look-back length. Gallwas just posted a very nice article on this here. Analyzing Dollar Range


    If you are a quantitatve analyst you may want to aggregate some market data into 15 minute VWAP highs and lows while looking at equities, and measure the size of the interval and then take a trimmed mean. 


      


    I run one algorithm that trades the S&P 500, where I datamine a focused range size for use in order placement. I accumulate the range size but only for the bars that the trading strategy has a long signalThis result allows placement of an initial order bracket a) outside the window of results for the downside stop b) just inside the window of results for an upside profit target. 


    This is a rolling window and dynamically changes as volatility or range size increases or decreases. Of course, my model may have other exit criteria, but for an initial OCO bracket order, it allows me to relax because I know that I have protection at the right location and a possible profit target that has a high probability of gettting hit if the market moves my way very quickly with some good vertical thrust, prior to my other conditions being met.    


    Knowing first that your model has real signal and moves in the direction of your position over time, is key. But adding the vertical dimension is also important especially when moves do not mature horizontally as expected, but moves vertically instead.

    Category :General 

    Tags :Matthew Goss Cimmino 

    By : Matt | April 14, 2014

    A few years ago, I came across an article from the Economist and it has impacted my thinking in many ways, ever since. Here's the link. It's an excellent read about   number inflation .


    The article has several key takeaways -

    1. Put simply, on average   everything is proliferating
    2. What is changing is not things themselves but rather   numbers
    3. Numbers are   losing their value   over time
    4. Counting any given array of things requires   slightly more numbers

    The authors, Jon C. Chura and Jarat N. Hanouch, research fellows at the Institute of Empirical Mathematics in Boulder, Colorado, at that time, went on to label this, "number inflation". Whether it was in the field of mathematics, science, education, or economics, inflation was observed.


    Economic inflation is probably the best know type of inflation. Even in an article written by the Boston Fed back in 1996 , around the same period as this Economist piece, showed that inflation was the most commonly used economic term during a prior 20 year period.


    I remember long gas lines during the 70's and inflation was a real fear. Consider the large deficits that most countries are running these days. Inflation fear remains a very powerful driver of financial, economic, and political decision making. Is it possible, that due to number inflation, our deficits and many of the systemic problems regarding the global financial system are illusory, as the article alludes to?


    //--------

    One very curious note, provided with the formula in the article, is that "the scale of the inflation is directly proportionate to the size of the number". Small numbers only inflate a little, large and huge numbers inflate a great deal.

    Are we to understand that without the correct PND number (correct deflator for numbers) that this equation will not generate the results that we'd expect to see? I'll leave that for those of you that are steeped in math, to mull.


    If you did read the Economist article via the link provided, you'll note that the authors of the article do go on to debunk inflation formulaically.


    Now my opinion about measuring success and empirical mathematics -


    Whether a Dell 486 running Windows 95 nearly twenty years ago, or an iPhone 5 of today, the culprit here that is commoditizing everything and devaluing numbers, is not the numbers themselves, or some inherent property of space time, but technology. Computers are just one form, and fast forwarding to 2014, we can plainly observe that technology continues to provide us with better and better rulers. Our ability to measure both the physical and the virtual worlds at finer and finer granularities is what generates in us this illusion of inflation.


    A quick and final example - Contrast going for a jog just 10 years ago, with your running workout in 2014, and you'll see what I mean. Today you are able to arrive home, grab some water, and after your shower, pull up statistics about your workout on your home computer once it has finished the data transfer via Bluetooth; review your entire route ran, calories burned, and average heart rate with accompanying metrics. All of this information magically transfered from your smart watch, (or so it would have seemed 50 years prior), along with a few photos taken and a Facebook post. How much more have you measured, and how much more information have you generated? Without technology, the numbers were unknown but always there waiting to be measured. With technology, well you know the answer to that. That's proliferation.

    How many examples can we go on to cite that will drive the point home? Read this over again sometime in the future and the number of examples will inflate proportional to the availability of new technologies beyond the date of this publication.


    So, did you measure "Measuring Success" well? You thought this was going to be another article about measuring personal or business success didn't you. If you agree with my viewpoint that inflation either real or perceived is mainly driven by technology, then I will measure this article a great success!

    Category :General 

    Tags :Matthew Goss Cimmino 

    By : Matt | April 07, 2014

    The process by which one tests a trading strategy using historical market data, called back-testing, doesn’t sound very sexy or exciting, but it has always been very intriguing to me. As a tool that is used by quantitative analysts, traders, and investors, back-testing is not very well understood, causes skepticism and debate, and is thought by many in the financial industry to be an unsound and inexact science. The ambiguity surrounding the back-test practice lead many to use less than optimal results to wager bets on trades with real money. The results obviously, may not be as expected. Subsequently, we have the CFTC warning that warns us about the use of back-tests and those that would use those results to sell products based on some form of back-test:


    This standard CFTC warning is required whenever using back-tests - (Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options futures or Forex) therefore, you should not invest or risk money that you cannot afford to lose.) The wording here is important.


    It is safe to say, that a more balanced approach, and a better educated 'back-tester', and those that consume back-tested strategies is needed. This in turn may help to reduce over-weighted reliance upon the descriptive statistics presented by back-test performance summaries and its advocates. Taking steps to alleviate an overweighting on the back-test process when selecting a trading strategy for use in real-time makes solid sense. Let’s review some of the issues surrounding back-testing.


    Author Back-testing Bias


    Hindsight Bias - Hindsight bias occurs when the author embraces past events as something that he or she believes could have been predicted with more accuracy than probability suggests.


    Confirmation Bias   - Beliefs impact confirmation bias by leading the searcher to search only for those variables that impact testing in a positive way, rather than searching for all possibilities.


    Unrealistic Competition Bias   - This form of bias occurs when results are reviewed against a weak benchmark that unfairly generates a comparison in favor of our back-test outcome, overstating future ability to profit.


    Market Data


    Incorrect Data   – It should be clear to all reading this, that incorrect data negatively impacts the accurate outcome of the back-test, and every step should be taken to ensure that the historical data used in the back-testing process is “clean”. Methods for checking data need to be incorporated into any good back-test regime.


    Sensitivity Testing Forgotten -   When testing, one should always perform a sensitivity test as well, sometimes called a robustness test, where the results are perturbed so that a full-spectrum of results may be observed. Tunnel vision, not a real term used when reviewing the back-test process but worth a mention occurs when parameters are used and testing is never performed in and around those parameters. Tunnel Vision. Results can easily deteriorate if the model under investigation is not solid, does not contain valid signal and is worthless. Moving to the left or right of a parameter could cause profits to fall of a cliff quickly.


    Selection or Population Bias / Survivorship Bias   - These two forms of biases are often intertwined. The tester errs when he or she does not select a large enough population in testing, or uses a population in testing that is not or cannot be used during the normal next phase of testing, the out of sample data set phase.


    Survivorship Bias   - This bias is interesting because it can creep into back-testing in ways that are not easily discerned. One must ensure that previous results from initial back-test are not somehow selectively iterated in another part or phase of the test. [This may occur when performing a statistical review of the results,a trimmed mean of the returns for example, and selecting only profitable results as subset when creating aggregated bins to further analyze the trajectory across time.] Clearly this is unintentional, but it does happen. Much thought must be given to each step in the back-test process so the tester does not fall into the back-test abyss.


    Another type of survivorship bias takes the form of testing on companies that no longer exist. That is why it is important to make sure that your data is reviewed for mergers and acquisitions, splits, and more.

    Finally, when incorporating fundamental data into trading models, and back-testing based on this type of information, one must take care to handle the stated earnings of companies involved in an M&A. Restated financial reporting is a requirement and may go on into the future for years. Does your back-testing data contain this type of information?


    Thoughts on Processing


    Curve Fitting   - Curve fitting is related to overuse of optimal parameterization. Variables are found that impact the model and only those variables that are perfect are considered. This simply means that optimal variables are tuned to the data, but outside the data-set used in testing, those optimal variables will cause the model to break down.


    Data Snooping   - Data snooping occurs when relationships and statistics within the chosen data-set are highlighted as significant (and also may be related to over-curve fitting or over optimization), but may not be significant outside of that data-set. Data snooping police often point to or use the word persistence. Too much snooping and profits earned in the back-test will not persist into the future during real-world trading.


    A certain amount of data mining and or data snooping is allowed in back-testing. Sound trading signals that are NOT noise, coincidental or random effects may be discerned through additional tests, and these test must be performed to compare output against buy and hold, noise and other quantitative metrics.

    Look-ahead Bias   - LAB occurs when the author uses information or data in a back-test simulation that would not have been known or available during the period being analyzed. This may lead to results that are sub-par.


    Other Important Points

    • Mutli-asset class testing also must take into consideration the differences between symbols, groups of symbols or a large universe of symbols from different asset classes.
    • Forex has a cost inherit in holding an overnight or longer duration position in any pair. Here we have time-horizon trade effects.
    • Futures have the ever problematic futures expiration and rollover problem.
    • Equities have non-liquidity issues, inactive companies, mutual funds, etc., where bid-ask impacts largely on back-test, forward walk, and real-time trading execution and costs.

    Summary:

    One must carefully consider whether or not they have the expertise, resources, and skill-sets required to attack back-testing in the first place. Hiring talented professionals in this area, or outsourcing may save the investor the pains and losses that may accompany trading in real-time, on the dark side of the back-test moon.


    Final note - Quite often the most simple stratgies 'work' because they embrace the most reality. From hyperbolic rallies, to flash crashes, and other shocks to the system, remember that when the modeler adds a parameter to ensure the caputre of one of these market regimes, we must degrade his or her strategy, add an additional parameter, degrade it again, ad-infinitum.


    For more information, visit www.strategydb.com


    About StrategyDB.com:


    StrategyDB.com is an innovator in developing trading strategy tools and applications. It

    has developed the Strategy Ticker / Strategy Matrix concept, one of the fastest growing

    applications in the field of analytics.


    Category :General 

    Tags :Matthew Goss Cimmino