StratOpt, Inc

Don't Just Optimize ... Strategize

 

Introduction To Walk Forward Processing

StratOpt is pleased to announce that we are now offering a very efficient tool for the TradeStation user. The StratOptWFP. The method known as walk forward testing of a strategy is a critical element of any strategy development process. This process involves a repetitive procedure where one will first select a total data series to be tested over and then they will divide this data set into pieces in order to do optimizations across this data set.

What Is A Walk Forward Process

The typical walk forward process is that the person will run an optimization over a part of the data and then they will select a smaller set of data outside of the optimized section and then see how the parameters that were selected by the optimization process would have done over this new period of data. The walk forward part entails that you will then move the optimized period forward to cover the remaining out of sample region and then the process is repeated numerous times until the data is exhausted.

If you were covering a several year span of data and doing a highly adaptive optimization where one may be using a month of optimized period and a week of out of sample testing, then this would require hundreds of optimization runs and testing of the out of sample periods to accumulate the data needed to determine the feasibility of the strategy. You can easily see that this process is quite time intensive and is the major reason why so many people do not utilize this method of testing in their development process. It simply takes too much time to complete especially when using the TradeStation optimizer for the testing.

However, This method of testing is quite critical to the overall success of the strategy trader as it can help you to determine if a strategy should be possibly traded or if the design is prone to being severely overfitted to the data. It can also give a more realistic expectation of how the strategy may perform in the future. A large part of the benefit of a walk forward process is in the proofing of a process and in the proofing of a strategy idea. Many people have developed what seemed to be good strategies only to have them fail miserably in real life trading as they were trading upon a highly over fitted strategy. If they had performed the walk forward testing properly in the first place they would have saved themselves some money by knowing in advance the propensity of the strategy to this overfitting.

What Will You Learn From the Process

A strategy that does make it through a walk forward test with acceptable results may still end up not working well in real time testing for one reason or another, but one that fails the walk forward test in the initial runs will fail in real time with near certainty. This is where the design of the StratOptWFP will be a huge benefit to you both in terms of time savings and the actual saving of money that you can avoid losing by trying to use a strategy that is highly overfitted and will fail in real time trading. It will save you hundreds of hours of your time to get through the walk forward process, it will allow you to do these walk forward tests for all of your strategy ideas to proof your idea where before you may not have done these tests due to the severe time constraints, it will save you money by showing you up front which strategy ideas are prone to overfitting, and it will help you to see if doing a walk forward testing process can improve your out of period trading by optimizing on more recent data and then doing periodic re-optimizations.

Benefits Of This Processor

Running a series of optimizations in a walk forward fashion using the TradeStation optimizer can easily eat up hundreds of hours of your time as you have to start the test, gather statistics, move the optimization dates forward and then start the whole process over again and again and again. With the StratOptWFP, then you will only need to make some minor modifications to your currently existing strategy ( estimated time is less than 10 minutes ), and then run ONE optimization over your entire period of study. You can run the optimization while you sleep or over the weekend if you like. Then you will only need to start the StratOptWFP and select one file from your hard drive, choose your settings and run the program. It will then do the walk forward process for you, and in most all cases it will complete this walk forward process for you in LESS THAN ONE MINUTE.

The one minute time for completion is pretty amazing by itself, but the StratOptWFP can also do up to 4 individual fitness selections at the same time in this time frame with three of those fitness selections being User Customizable so that the user can build their own fitness calculations in their EasyLanguage code. It will give you an instant graphical view of the corresponding equity curves of the out periods for each fitness function so that you will know if you would like to pursue this strategy further. You can also vary the in period and out period settings manually and see the effects of those changes within another minute's worth of time, if you like. There is also the option of not selecting the very top fitness result from each of the 4 different fitness functions. You can choose the Nth value from the max or the min value that was selected during the walk forward testing. This will allow you to possibly avoid selecting a parameter set that is an outlier and put you into a range that is perhaps more within a plateau of ranges and not on a needle point on the parameter landscape. You can also use this to gauge how sensitive the strategy is to minor parameter changes by walking the Nth value through a series of tests to see how that affects the overall results.

Additional Features

The walk forward processor also has the ability to optimize for the best in period to outperiod ratio for each of the 4 different fitness selections. You might, for instance, run a normal test with a static value for the in period and out period to see if the strategy holds some merit for further testing. If you see that the system did hold up fairly well then you might want to see what the best in period to out period ratio is for that particular fitness function that you are interested in. You would only need to set a range of values for the in period and the out period and then you can optimize that fitness selection in a matter of minutes. The result will be a great benefit for you in determining a method of testing that you might then follow in real time trading of the idea.

The WFP will create a set of files for each fitness function that you then simply copy and paste the contents of the file of your choice into your modified TradeStation EasyLanguage strategy code in the appropriate section and then re-verify your strategy and it will then run the strategy and show you all the statistics that you currently get from the Strategy Performance Report, but with the out of period sections being shown and not the fully optimized statistics that were being shown before. It will also build an Excel compatible csv file of the equity curves for each of the 4 fitness functions that you can use for further studies.

A View Of The Processor Window

Here is a picture of the program window and the results of one of my strategies that was ran through the processor. If you can run your strategy through the TradeStation optimizer within, for instance, a weekend then this product would be very useful to you for certain on that strategy. If you are using a strategy that has many parameters and you can't perform an optimization across the parameters within a reasonable and acceptable time frame then this product would not be a good solution for that particular strategy as this product is not a stand alone optimization product and it still requires a single optimization run using the TradeStation optimization engine. I would think that during the strategy development process on your current strategies or on your future strategies then you will likely find that you will have a use for this product as it will greatly simplify your development and testing process and allow you to proof your concept in a very rapid fashion. The time savings alone makes it a very valuable item to have in your toolbox, but being able to proof out your system in a true walk forward manner is most definately very valuable.

 

 

ANNOUNCING STRATEGY CONVERSION TOOL

I have developed an automatic strategy conversion tool which will greatly simplify your strategy conversion process and help to prevent some issues caused by typographical errors and oversights. This tool was developed primarily for the conversion of the new StratOptWFO strategy optimizer, but can be used by those who only need the StratOptWFP since it is designed to create both versions needed. All it takes are a few clicks and entries and the EasyLanguage code modules are written for you. Then it is a simple two part copy and paste operation to put the code into TradeStation.

If you have any questions about this product or its usage then SEND ME AN EMAIL.

Click Here To Purchase StratOptWFP

Notes:

This is not a strategy optimizer. It will require that you use the TradeStation Optimizer to run a single optimization over a set of data. For details on a full strategy optimizer that will interface with TradeStation then check for my StratOptWFO tool

This product is designed to be used primarily for simple daytrading types of strategies, but it can also be used for swing trading systems. There is an assumption made that at the end of each period any open positions are simply closed at the interface without regards for the remaining length of the trade. This does not negate the effectiveness of the testing process for swing trading systems that trade fairly often. The results may differ from what one would get in TradeStation, but the viability of the strategy will still be proofable. If you have any questions concerning this product please contact me in advance of purchasing the program and I will try my best to answer then. If you would like to see a live demonstration of the product then contact me and we can set this up.

TradeStation and EasyLanguage are registered trademarks of TradeStation Technologies, Inc. Neither TradeStation Technologies nor any of its affiliates has reviewed, certified, endorsed, approved, disapproved or recommended, and neither does nor will review, certify, endorse, approve, disapprove, recommend, any product or service that offers training, education or consulting regarding the use of EasyLanguage.