fitness function and predictive power
Posted: Oct 07 2011
Hi everyone,
I am currently experimenting with different fitness functions that I found in this forum (see http://www.multicharts.com/discussion/v ... f=5&t=8838). As I was doing this, I thought: how does the choice of a particular fitness function influence the predictive power of a trading system?
Let's say I would like to increase the average trade of a trading system, while minimizing the drawdown and improving the profit factor. In this case, I could use a fitness function such as: (Net Profit / Max Drawdown) * Avg Trade * Profit Factor. My question is: am I curve-fitting the results, by trying to artificially make a trading system tradable (high enough avg trade and profit factor) that otherwise wouldn't be? Should I stick with more traditional fitness functions such as the CPC (Sunny Harris), Expectancy (Van K. Tharp), PROM (Robert Pardo), etc.?
With the fitness function above, my system walks forward correctly (IS vs OOS). I also ran a full walk-forward anaylysis and the WFE was good. Still my question remains: is it so because I artificially inflated the avg trade with my fitness function?
I hope I was able to explain myself... I am curious to know what you guys think about this matter.
Thank you!
I am currently experimenting with different fitness functions that I found in this forum (see http://www.multicharts.com/discussion/v ... f=5&t=8838). As I was doing this, I thought: how does the choice of a particular fitness function influence the predictive power of a trading system?
Let's say I would like to increase the average trade of a trading system, while minimizing the drawdown and improving the profit factor. In this case, I could use a fitness function such as: (Net Profit / Max Drawdown) * Avg Trade * Profit Factor. My question is: am I curve-fitting the results, by trying to artificially make a trading system tradable (high enough avg trade and profit factor) that otherwise wouldn't be? Should I stick with more traditional fitness functions such as the CPC (Sunny Harris), Expectancy (Van K. Tharp), PROM (Robert Pardo), etc.?
With the fitness function above, my system walks forward correctly (IS vs OOS). I also ran a full walk-forward anaylysis and the WFE was good. Still my question remains: is it so because I artificially inflated the avg trade with my fitness function?
I hope I was able to explain myself... I am curious to know what you guys think about this matter.
Thank you!