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#465844 - 05/15/17 07:42 Always accept detrended result as more realistic?
Dalla Online
Member

Registered: 02/24/17
Posts: 284
I was developing a trend following system the other day, and it got surprisingly good results. Eventually realized that I had forgotten to detrend the trades while training (but not while testing), and when doing that the system was completely destroyed (still profitable, but not comfortably so).

So should you always accept the detrended result as more realistic?

Also, when in your development process should you detrend the trades?
I tend to do it as a part of step 6 if you follow http://www.financial-hacker.com/build-better-strategies-part-3-the-development-process/

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#466372 - 06/12/17 10:46 Re: Always accept detrended result as more realistic? [Re: Dalla]
jcl Offline

Chief Engineer

Registered: 07/22/00
Posts: 26491
Loc: Frankfurt
It depends on the system. If it's perfectly symmetric in long/short, detrending is not necessary. If not, detrended results are more realistic. Use detrending also for training, otherwise the training would be affected from trend artifacts.

It is unusual that you got good results when detrending for testing and not for training. I would normally expect the opposite.

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#466378 - 06/12/17 11:37 Re: Always accept detrended result as more realistic? [Re: jcl]
Dalla Online
Member

Registered: 02/24/17
Posts: 284
Does it make sense to to detrend the test results also?
Currently I'm using this in scripts, so only detrend during training

if (Train) {
Detrend = TRADES;
}

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#466385 - 06/12/17 16:00 Re: Always accept detrended result as more realistic? [Re: Dalla]
jcl Offline

Chief Engineer

Registered: 07/22/00
Posts: 26491
Loc: Frankfurt
That's what I'm using too. But when the strategy is asymmetric, f.i. long-only, it's better to also detrend in test mode.

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#471671 - 03/13/18 20:13 Re: Always accept detrended result as more realistic? [Re: jcl]
kujo Offline
Member

Registered: 12/03/17
Posts: 129
Loc: Halifax, NS
I have a coupe of questions on detrending:

1. As I understand, it's always a good idea to use detrending (Detrend=TRADES) in the Train mode. This way parameters are not affected by a trend if there is any. But when it comes to the Test mode it's better to use detrending only with asymmetric strategies? No need to use it with symmetric strategies like Workshop4? Am I right?

2. Second question is about using detrending wth trend strategies. What's the idea of detrending in the strategy that is based on trend leveraging? Maybe it makes sense because underlying trend (that is removed by detrending) is at a much higher timeframe than the trends identified by the strategy. But again, by nature a Trend Following system is supposed to take advantage of this trends. Why to remove them?

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#471678 - 03/14/18 10:06 Re: Always accept detrended result as more realistic? [Re: kujo]
jcl Offline

Chief Engineer

Registered: 07/22/00
Posts: 26491
Loc: Frankfurt
Depending on the strategy, detrending is not always a good idea. When it exploits some long-term trending effect, you don't want to detrend the trades. When it uses short-term trend or mean reversion, and is asymmetric, then detrending is normally good.

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#471687 - 03/15/18 00:29 Re: Always accept detrended result as more realistic? [Re: jcl]
kujo Offline
Member

Registered: 12/03/17
Posts: 129
Loc: Halifax, NS
In the 4th chapter of The Black Book the mean reversion strategy is symmetric, as I understand. Could you please explain why detrending is used in Train but not in Test?

Also, could you recommend a book or any source of info regarding detrending concept?

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#471690 - 03/15/18 09:07 Re: Always accept detrended result as more realistic? [Re: kujo]
jcl Offline

Chief Engineer

Registered: 07/22/00
Posts: 26491
Loc: Frankfurt
The strategies in the black book are mainly for illustrating concepts. Detrending is used in Train mode not because the system would absolutely need it, but more for showing how to activate detrending in a particular mode only.

Most books that I know are listed at the end of the manual. I remember the Aaronson book mentions the concept of detrending, and some of the other books probably too.

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#471691 - 03/15/18 12:13 Re: Always accept detrended result as more realistic? [Re: jcl]
kujo Offline
Member

Registered: 12/03/17
Posts: 129
Loc: Halifax, NS
I see, thank you!
I'll ask more general questions then. From your experience when it makes sense to use detrending in Train but not in Test?

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#471693 - 03/15/18 14:50 Re: Always accept detrended result as more realistic? [Re: kujo]
jcl Offline

Chief Engineer

Registered: 07/22/00
Posts: 26491
Loc: Frankfurt
Almost always, since the test should be done with real historical data. Exception is when you need explicitely a detrended test result for some reason.

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