I’m an apalling blogger, I admit that. Having received several encouraging emails from people interested in Hurst’s theories, I realised that I haven’t posted anything here for a while. In fact I have been working away, burning the midnight oil trying to get the software to really do what I set out to have it do: analyse the market the way Hurst would have done. I’m pleased to say I’ve made some progress. Now I am working on updating the screensaver aspect of the software so that it performs exactly as the main software works. On the way I have encountered many interesting problems, and I’m going to start sharing those on this site, which I guess is what blogging is all about! Today I’m going to write about the whole screensaver idea.
The screensaver
I have been asked why on earth I’m building a screensaver as a part of the software package. The reason is very simple. At the moment when loading data and creating a chart for the first time the software takes about 4 minutes to perform the phasing analysis on a chart with 15 years of history (on my computer, which is fairly fast, but not a super-computer by any means). Then every day it updates the analysis, a process that takes about 30 seconds. Twice in every trading cycle (and I am mostly looking at the 20 and 40 day cycles at the moment) the software does a complete re-evaluation of its phasing analysis, a 3-4 minute process. It’s all very well stepping the software through its paces every day, and seeing how it performs, but that doesn’t help one to know that in fact the software is “working” – in other words giving good advice about when to buy and when to sell. The only way to do that is to look back at a history of several years worth of the software doing its thing. To generate that history it is necessary to step the software through the data day-by-day, which is a process that really ties up your computer, and isn’t very entertaining. Which is why I am building the screensaver. From the software you allocate a chart you are working on to the screensaver, and then when you take a break the screensaver starts building the history. It’s a process that seems to work fairly well. The screensaver also builds a “trading journal” so that you can go back and see why the software bought and sold when it did. For me this is the key to making the software really work. Of course I can only expect the software to work as well as an expert in Hurst’s theories would work … and although there is some evidence that the theory works, the real test will be the trading history generated by the software, and the ongoing trading the software does.
Backtesting
Backtesting has earned itself a very bad reputation in trading circles, mostly because it is possible to optimize the parameters a system uses so as to perfectly fit the historical data, and produce a fabulous trading history that simply doesn’t work when you use the same parameters on new data. So is there a danger that my screensaver is going to fall prey to this dreaded problem (which has been the downfall of many trading systems – and is related to the problems Rich Swannell encountered with his Refined Elliott Trader because he presented hypothetical results rather than real ones)?
The simple answer is no! But I should explain that. There are two reasons why I don’t think optimized backtesting is going to distort the results generated by the screensaver:
There are two ways in which the screensaver’s results will not match the real performance of the software:
OK, so that’s it – why I’m creating a screensaver. The other thing about it is I think it looks cool! Here is a sample: