Can your system do the walk?

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Can your system do the walk? Powered By Docstoc
					Can your system do the walk?
Murray A Ruggiero Jr
Futures; Apr 2010; 39, 4; Docstoc
pg. 44




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DOCUMENT INFO
Description: There are many ways to build a had trading system, but two of the more common are the lack of a valid premise and the selection of non-robust parameters. To overcome these issues, developers often split their data into two sets: the development, or in-sample, set and the test, or out-of-sample, set. A common split is using 80% of the data for development and 20% for validation. A better approach is called walk-forward analysis, originally discussed by trading system developer Robert Pardo, author of "Design, Testing and Optimization of Trading Systems." One issue with walk-forward testing is it can be labor intensive. Walk-forward analysis is a type of adaptive system technology, and most trend following systems did badly in 2009, but the authors' walk-forward analysis was profitable in 2009 because parameters were allowed to change over time.
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