Re:Algorithmic Trading: The Play-at-Home Version
by tomp on Monday August 10, 2015 @08:25PM
(#10038391)
> You'd want an adaptive algorithm that could exploit 'trends' over any time period.
Of course that what you want, but how will you find it, and more importantly, how will you know you found it? In a bull market, an "adaptable general algorithm" that makes 10% in a year is statistically indistinguishable from an algorithm that buys and holds S&P500, unless you design your backtests very carefully.
Re:Algorithmic Trading: The Play-at-Home Version
by jsprogrammer on Monday August 10, 2015 @09:16PM
(#10038560)
Obviously it is a problem, but it will get you much further than the original suggestion to select some arbitrary number of days to go back.
>If you back test over the past 20 years then I'm not sure it helps much as the market of 20 years ago didn't really have any of the major market drives of today's markets, HFT's, huge numbers of hedge funds and the money they bring, and huge passive investing via ETF's, all those factors were there 20 years ago, but they weren't the major market drivers that they are now.
I imagine you wouldn't want to 'back test' over some arbitrarily selected number of years of data. You'd want an adaptive algorithm that could exploit 'trends' over any time period.
But, like someone else mentioned, backtesting is near meaningless: the only thing that matters is actual performance.