Chorlton
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As for how to partition your data set 75%/25% or 50%/50, I cannot see that there can be any hard and fast rules. If market conditions change, then no partitioning rule can save you. Probably better to test over bull market periods, bear market periods, high vola, low vola, thru market shocks such as 9/11 etc etc. Better to try and stress the system, than try to rely on data set partitioning to gain confidence.
Hello DCraig,
Totally agree with your comments !! With my particular system, my backtesting has been completed on data from 1998 to 2004 (inc). The reasoning for this was during this period, the FTSE experienced a Ranging Mrkt, A Bear Mrkt and a Bull Mrkt, all of around the same amount of time (ie. 2 years in each phase).
Consequently, my reasoning is that if my System performs equally well over the entire testing period (which captures all these different phases) then the overall strategy should be robust enough to deal with future Mrkt corrections.
What would be your view on this? Does this sound like a reasonable approach, or am I missing something important?
Thanks in advance,
Chorlton