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IMHO, when developing a trading strategy it helps to document and share your strategy with others as you'll come to better understand it from the questions and
by jhowell 14y ago
IMHO, when developing a trading strategy it helps to document and share your strategy with others as you'll come to better understand it from the questions and observations others make. No one strategy can or will be successful forever.
Many algorithms stop performing when market conditions (lasting hours, days, weeks, months) change. Having a deep understanding of your algorithm and what makes it successful for any given period of time can better help you make adjustments when needed.
Lastly, this may be where the algo started but not necessarily what they will run in production. It's much more likely to no longer be discussed at this point. Perhaps similar to ideas are worthless, execution is everything for startups.
edit: typo
- codex 14y agoIf an algorithm stops performing after hours or days, it's likely you haven't discovered anything, but are simply seeing the effects of random noise on your hundreds, thousands, or millions of signal possibilities.
- jhowell 14y agoOne example that comes to my mind could be an algo closely related to the price of another security or index of what have you. At times, this algo could be highly correlative and at other times less so. I agree with you about random noise. Ultimately I'm just looking for something to make me feel like I'm taking an "informed position." You never really know what's going to happen.
- chatmasta 14y agoHave their been any studies on the accuracy of backtesting data in predicting actual returns? Comments like yours always appear on these articles... "You can backtest, but you never know what's going to happen!" Well, obviously. But at what point is testing against 12 years of backdata not enough? Is it a matter of understanding exactly what your algorithm depends on and watching for those conditions to fail?
- jhowell 14y agoTo me, backtests are constructive but like you said, not predictive and perhaps questionably meaningful. Any good strategy using technical analysis will be able to identify a trend in any market. What differs are entries and exits. These factors can be influenced by current events making them tough to model into an algorithm especially with one with a shorter timeframe.