How to use Curve Fit Protection

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How to use Curve Fit Protection

Postby cme4pif » Wed Feb 04, 2009 3:36 am

When setting up a one click set up there is a tab for Curve fit protection. There are Green ON and Red off indicators, I thought if I clicked them I could change them on this screen, but I can't. Where do you turn these on and Off?

Also you can place curve fit protection for factors like Kurtosis but not Sharpe ratio, yet in the forum your users mention Sharpe ratio.

I got very interested in these factors when I read on page 49 of the January issue of Stocks and Commodities magazine mentioned that K ratio and the Sharpe ratio are the most important measure when evaluating a trading systems performance.

How do you use these factors in screening a system? Do you agree with Lars Kestner that these are the most important factors in screening a system?

Blaine
cme4pif
 
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Postby Overload » Wed Feb 04, 2009 10:43 am

The items on the Curve-Fit Protection tab are for display only, but they provide a brief glimpse of whether the various mechanisms available throughout the system are being used or not. For more information on turning these on or off, click the Help button on the OneClick Setup window while viewing the Curve-Fit Protection tab. The Help will then display additional information on each of the mechanisms, including examples on how each can be implemented.

It's important to make the distinction between curve-fit protection and system performance. There is certainly some overlap here, but system performance is more concerned with the risk/reward quality of a system while curve-fit protection is more concerned with whether the system will work as effectively in the future as it did in the back test. These are really 2 unique aspects of a trading system to consider.

I do believe that both the K-Ratio and the Sharpe Ratio are good values to consider. As I said, there is some overlap between the 2 aspects, and that is why K-Ratio was chosen to be in the Curve-Fit Protection tab and Sharpe Ratio was not. There are probably arguments for either or both to be included or excluded. But remember that the Curve-Fit Protection tab is a display indicator only. Any performance value can be added as a filter for any reason, regardless of whether or not it is on this tab.

You can add Sharpe Ratio and/or K-Ratio to your OneClick scoring or filtering if you wish. These are handled on the Strategy Performance and Multi-System Performance tabs of the OneClick Setups. See the 2nd Tutorial item on Improving Your OneClick Search for more information on revising these tabs.

Hope this helps.

Pete
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