How do we know we have enough samples of whatever it is we are testing? What amount of trades is the number? When can we be confident we have enough trades to rely on the results of our back test? Jacob Bernoulli, the famous Swiss mathematician, is best known for his introduction of the theorem [...]
Like any other effort in science, the back test can vary from shallow and useless to very useful. It is a matter of the quality of information that forms the test. A shallow back test, and the discipline to stick with it, is a recipe for disaster. The quality of information determines the significance in [...]
Successful system trading, in spite of the financial rewards, can be frustrating. A quantified mechanical model will take many decisions off the table. Yet, various issues, particularly the psychological approach to the issues, will always be in play. Ed Seykota in the book, “Market Wizards,” writes, “Systems trading is ultimately discretionary. The manager still has [...]
