The Evaluation and Optimization of Trading Strategies by Robert Pardo

Author:Robert Pardo
Language: eng
Format: epub, pdf
Publisher: Wiley
Published: 2011-01-05T05:00:00+00:00

As in so many things related to trading, of course, there are many degrees of robustness. We always seek the most robust strategy possible. And we do so because a robust strategy is our best insurance of positive outcome in the highly uncertain world of trading. As defined, it is easy to see that the robust strategy is one that will continue to perform profitably when markets change. And since markets are in a relatively constant state of flux to some degree or another, the more robust the strategy, the greater the chances of lasting profit.

Larry Hite, a money manager profiled in Market Wizards, by Jack Schwager, said, “We are not looking for the optimum method; we are looking for the hardiest method.”

Replace hardiest with robust and we see the importance this accomplished trader places on this aspect of a trading strategy. A trading model that makes money only in the T-bond market during a high volatility, roaring bull market and is profitable only over a small parameter set is a trading model that is not too likely to survive long term, trading a broad basket of markets with multiple trends and varying degrees of volatility.

I discuss different aspects of the robustness of a trading strategy in Chapters 8, 10, 11, 12, and 13.

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