Welcome to my online repository of research and insights on automated trading system development
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 [...]
Tags: aronson·monte-carlo
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 [...]
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 [...]
Tags: aronson·bootstrap·data mining
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 [...]
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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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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