Au.Tra.Sy blog – Automated Trading System

Systematic Trading research and development, with a flavour of Trend Following

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Entries Tagged as 'Backtest'

Monte Carlo Permutation: Test your Back-Tests

August 18th, 2010 · 1 Comment · Backtest

 
The second method to evaluate the statistical significance of a back-test result presented by Aronson (in EBTA) is the Monte Carlo Permutation. This is an extension of the classic Monte Carlo method, applied to rule testing.
The concept behind the Monte Carlo Permutation is similar to the Bootstrap method:

Generate multiple random outputs based on the single [...]

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Bootstrap – Take 2: Data Mining bias, Code and using geometric mean

August 13th, 2010 · 7 Comments · Backtest, Code

In part 1 of this bootstrap post, we looked at how to apply the method to establish the statistical significance of a single trading rule. In Part 2, we’ll look at how to deal with the data mining bias, the impact of geometric vs. arithmetic mean return. The code implementing the bootstrap test is available [...]

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The Bootstrap Test: How significant are your back-testing results?

August 11th, 2010 · 6 Comments · Backtest, Books

As mentioned in the Evidence-based Technical Analysis review post, the main value of the book lies in the presentation of the two methods allowing for computing the statistical significance of trading strategy results, despite having a single sample of data:
Both methods solve the problem of estimating the degree of random variation in a test statistic [...]

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Evidence-Based Technical Analysis

August 5th, 2010 · 10 Comments · Backtest, Books

Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals

 
Today I’ll be talking about an excellent book, which was recommended on several “quant” blogs I read: Evidence-Based Technical Analysis by David Aronson. One of the main reasons I picked this book is because it teaches you to fish (instead of giving you [...]

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Slippage – Take 3: Stop-Limit Orders

May 20th, 2010 · 7 Comments · Backtest

Another slippage post inspired by a reader’s comment (thanks to Eventhorizon this time).
Stop-Limit Orders
The idea is to use stop-limit orders in the Donchian Channel system to avoid slippage. The stop-limit orders would prevent the system from buying/selling above/below the entry breakout level – thus reducing entry slippage.
Of course, with daily data, it is impossible to [...]

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Follow-up on Slippage

May 17th, 2010 · 7 Comments · Backtest

The previous post on slippage generated very good comments and I decided to address some of the points discussed in a follow-up post.
Slippage and Long-Term Systems
Last post concluded with a question:
How can you reduce slippage as a small trader?
You might not be able to reduce slippage in absolute terms, but you can still reduce the [...]

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