Recent content by meanreversion

I use a 4 year IS period then a 1 year OOS period. I don't recall the precise reason I use that, but I remember researching it at the time and deciding that was a good mix. Even then, you still need a way to determine whether the system is any good or not. Walk forward analysis definitely...

Your analogy with poker is fatally flawed. If you have four aces, you know that the chances of winning the hand are very high. On the other hand, you might THINK a certain trade set-up has a high probability of success, but that's only in your head and cannot be mathematically proved.

Is your point that any form of back-testing is redundant? If you think that back-testing has some merit, then WF is just an attempt to prevent over-fitting, that's all.

Work out your overall return in %/year, calculate your maximum drawdown and then look at the ratio between the two. If it's more than 1, you may have a decent system. Similarly, you could calculate your Sharpe ratio.. take the annualised volatility of returns, divide by the annualised standard...

Yes, Amibroker does all this as well.. it assembles the OOS simulations together to give an overall OOS backtest. Nonetheless, you still need to decide the output which determines whether you think the system is "robust" or not. Typically, I will look for return/drawdown of greater than 1, but...

Darwin - good thread, well done! I use Amibroker for testing strategies.. the walk-forward analysis is excellent and is just a click of a button like the backtest. There is a decent book on forward testing by Robert Pardo, you may have come across this. What is not entirely satisfactory (to...

To the OP, I'd highly recommend "Way of the Turtle" by Curtis Faith, a detailed insight into a real world trend following approach. I've been trend trading for a few years now, it's certainly not the Holy Grail ... a quick glance at CTA returns this year and last will tell you that. However...

Hi Goldmember, interesting thread. However, your impression of what bank traders do is off the mark. Most of the P/L is generated from earning bid/ask, handling client flow and orders, structuring products and so on. The days of banks paying punters to sit there and toss coins are long gone...

How long have you been selling vertical spreads, and what has been your worst drawdown along the way?

Hi Dimtrad, thanks for your interesting contributions to t2w. Can I ask about the logistics of trading the spread.. you mention you use IB (as do I). Do you have a tactic for legging into the spread, or do you hit the bid/pay the offer on the two strikes, at the same time?

The US is the only nation that can print money to buy oil? This is demonstrably false. Other oil importing countries (e.g. UK and Japan) have recently printed. Am I missing something here -- please explain...

Yes, this is correct. Put call parity tells you that C - P = outright position. Thus what you have described above is turning a deep ITM put into a very low delta call by hedging with the underlying. Now the question you have to answer is --- who is going to sell you an option at intrinsic...

Tell me how you would lock in a profit if you could buy the option at intrinsic?

That's why it can't happen. If you can buy any option (whether American or European) for less than intrinsic, you can immediately lock in a risk free profit by hedging it with the underlying. If you can do that, then it means the person on the other side is willingly giving you money - I'd...

This statement is incorrect, you're attempting to apply flawed logic. An option cannot be worth less than intrinsic, ever. Use this as your stating point (it immediately invalidates your statement).