Topic: Using Synthetic DataHorizons For Generating Strategies
Hannahis had an interesting post earlier today -- here's the link:
She described why she thinks that EAs sometimes behave differently (i.e. worse) than what we would expect based on their back testing results and statistics. Her main point, I believe, is that there is nothing wrong with the EA. Rather, EAs trade better or worse in certain markets -- such as ranging or breakout. As a result, if your EA was generated, optimized (i.e. curve-fitted) using ranging data then it may perform poorly when it encounters breakout data -- or vice versa. Her "take home" message was not to lose heart -- this is just the way Forex works. The best we can do is to be aware of the current market trend and which of EAs perform best in the current market.
And this gave me an idea -- please feel free to shoot it down...
Suppose I normally trade EURUSD H1 and use the latest 12 months of data from my broker by downloading a *.csv file -- e.g. EURUSD60.csv. Why can't I create a "synthetic" *.csv that includes 6 months of ranging data plus 6 months of breakout data and use that as input for the generator. I mean, *.csv files are easy to edit using a Text Editor.
Or -- suppose I like Mult-Market testing (which I don't). With MM testing we apply a filter after the fact -- that is, we have a collection of 100 strategies and by the time we apply MM filtering then we end up with 2 (since MM is so strict). But suppose I create a EURUSD60.csv file that includes 6 months of EURUSD data plus 6 months of USDCHF data and use that as input for the generator.
By creating "synthetic" DataHorizons then the strategies that are generated are curve-fitted and optimized against a more varied data set. In other words, they have more experience since they've been stress-tested against different types of data -- multiple trends, multiple markets, whatever. This is much different than applying filters afterwards.
When strategies trade in a real account they don't know where the data comes from -- they are just reacting to patterns of numbers. I'm not 100% sure and I'd like to hear comments to the contrary -- I don't think there is any harm in mixing data from different markets or from different periods. We all understand that past data is no indication of future data -- so the data we add to a synthetic DataHorizon file is just as valid as the data it replaced.
Again, the benefit of using a synthetic DataHorizon file is we would then have some control over the trends (and markets) that are used when generating strategies in the first place -- with the hope that the strategies that survive are better suited to what they will encounter when placed in a live account.