- ago
I am requesting a check box option to have a ‘Pre-Live Optimization’ to be included in walk forward optimization.

Pre-Live Optimizations are used to identify what the best performing parameters are in the period of time immediately prior to the end of the overall test period. This makes these parameters ideal for live trading since they are based on the most recent dynamics in the market. These parameters can be seen on the ‘Pre-Live Optimization’ screen as shown below.

8
1,078
6 Replies

Reply

Bookmark

Sort
- ago
#1
I see this option in almost every article I've read on WFO to utilize it correctly for live trading. Are there reasons this wasn't considered in the original development?
0
Glitch8
 ( 7.81% )
- ago
#2
Because it was based on the Pardo's book Evaluation and Optimziation of Trading Strategies, which is where the whole WF idea came from, and it's not called out there.

https://www.arabictrader.com/cdn/application/2009/05/28/pdf/v202/07A60519-8570-744D-72D5-2C1D0C69349D.pdf
1
- ago
#3
That's is a very very good book. From my interpretation is that let's say your WFA has an IS of 1 year and OS of 3 months. And the current WFA has shown it robust and ready to trade. According to the book you would need to re-perform the WFA every OS period, 3 months in this example to keep up with the market trend changes and have the strategy perform effectively. However if you use your last optimization parameters you are now technically 3 months behind and then live trading on 6 month OS vs the WFA 3 month interval you optimized for. This is where the Pre-Live optimization comes in that you would then use for 3 months and then re-run every 3 months therafter to align with the WFA from what he stated in the book.
0
- ago
#4
QUOTE:
The use of a trading strategy developed with Walk-Forward Analysis should mirror in real-time use the optimization and walk-forward windows identified thereby. If the walk-forward window is three months, then the model must bereoptimized at the end of every three months of trading and so on for different window sizes.
from the book

Would you just run standard Optimization for your out of sample duration? Or in this case I believe this is where the Pre-Live optimization period is necessary and utilized to update parameters every 3 months.
0
Glitch8
 ( 7.81% )
- ago
#5
Thanks for bringing this to light, looking forward to start working on this request as soon as it rises to the top of the queue!
1
Glitch8
 ( 7.81% )
- ago
#6
Looks like this has finally risen to the top of the wish list so let's let it see the light of day.
1

Reply

Bookmark

Sort