V. 9:8 (345-345): Letters To S&C by Technical Analysis, Inc.

V. 9:8 (345-345): Letters To S&C by Technical Analysis, Inc.
Item# \V09\C08\LETTER.PDF
Availability: In Stock

Product Description

Letters To S&C by Technical Analysis, Inc.



Congratulations to Mark Fishman and Dean S. Barr for their description of a hybrid system for market timing (STOCKS & COMMODITIES, August 1991). Their use of neural networks to generate "IF-THEN" rules to feed an expert system truly combines the best properties of both technologies.

One shortfall of the article, however, was the lack of information provided by the authors with respect to the predictive power of the hybrid system. It's easy to create a system that generates profitable buy/sell signals with the benefit of hindsight. And training a neural network (or expert system) on a series of data and then evaluating the system's trading performance on the same data is a textbook case of 20/20 hindsight.

One way to test the predictive power of a system is by using out-of-sample testing as described by Thomas P. Drinka in his article "Finding reliable trading strategies (S TOCKS & COMMODITIES, May 1990). Using this technique, the authors would begin by training the network on half of the data, say through the second quarter of 1989. Next, trade the resulting system through the following quarter. Then retrain the system on the new data and continue "walking forward" through to the present. This technique would provide some meaningful data as to the system's ability to predict market behavior in the following time segment.

Authors Fishman and Barr did mention that they trained their system on five years of data and it accurately predicted the succeeding quarter. This is impressive in itself. But additional out-of-sample testing is clearly in order.


*Note: $2.95-$5.95 Articles are in PDF format only. No hard copy of the article(s) will be delivered. During checkout, click the "Download Now" button to immediately receive your article(s) purchase. STOCKS & COMMODITIES magazine is delivered via mail. After paying for your subscription at store.traders.com users can view the S&C Digital Edition in the subscriber's section on Traders.com.

Take Control of Your Trading.
Professional Traders' Starter Kit
All these items shown below only $299.99!
  • 5-year subscription to Technical Analysis of STOCKS & COMMODITIES, The Traders' magazine. (Shipping outside the US is extra. Washington state addresses require sales tax based on your locale.)
  • 5 year access to S&C Archive
  • 5 year access to S&C Digital Edition
  • 5-year subscription to Traders.com Advantage.
  • 5-year subscription to Working Money.
  • Free book selection.
  • Click Here to Order