Updates to the trading system optimization code.

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Written by Forex Automaton   
Friday, 11 September 2009 09:00

The following changes to the optimization code have been recently  introduced and are documented here for the record.

  1. An inconsistency between the way a time series is constructed and the way trading is done has been corrected. The nature of the inconsistency: when the daily time series was constructed by polling a database of aggegated daily data, daily data points corresponding to Saturdays were not included. These data points aggregate data in between Friday 9am (New York) and Saturday 9am. Meanwhile, the trading algorithm could keep the trading positions open over the weekends, including the active trading hours between 9am on Friday and Friday end of business. Thus, trading positions had no exposure to possible stop-loss losses during this time period, and the learning algorithm could not benefit from the data. The correction is to include the incomplete data points from Friday trading while still having the possibility of keeping the positions open over the weekends.

  2. A feature having to do with the risk statistic calculation has been retracted. The nature of the feature: an entry into the archive of logarithmic annualized monthly returns was only made if the return for a given month differed from zero. The feature was introduced intentionally with the understanding that staying away from trading should not be rewarded as a way of minimizing the risk. However, the rationale for treating it that way looks now questionable.

Both features created a possibility of occasional significant inconsistencies between the annualized returns calculated on the basis of start-end comparison (direct method) and as the exponentiated mean of the monthly time series of logarithmic annualized returns. The effect of these features on the validity of optimization results obtained so far is expected to be minor.

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Last Updated ( Monday, 04 January 2010 12:29 )