Reoptimization( Model Shelf Life )
Posted: Tue Apr 25, 2006 12:42 pm
Is it true to say the size of the test window has a affect on shelf life?
Systems that use optimization require some type of periodic reoptimization to fine tune the trading model to current market conditions.
Short test windows require more frequent reoptimization,(they have shorter shelf-life),and clearly longer test windows require less.
General Rule:
For the size of the trading window is between 1/8 and 1/4 of the test window.
So if a 24mth test window is used to optimize the system,then it can safely be traded forward for between 3 (24/8 = 3 ) and 6 (24/4 = 6 ) mths.
Any thoughts ?
Systems that use optimization require some type of periodic reoptimization to fine tune the trading model to current market conditions.
Short test windows require more frequent reoptimization,(they have shorter shelf-life),and clearly longer test windows require less.
General Rule:
For the size of the trading window is between 1/8 and 1/4 of the test window.
So if a 24mth test window is used to optimize the system,then it can safely be traded forward for between 3 (24/8 = 3 ) and 6 (24/4 = 6 ) mths.
Any thoughts ?