luigy replies to: ea optimization


Have you considered the effect of a black swan?

That’s the main reason optimized systems fail. They do not account for paradigm-shifting events.

I just Googled that to make sure my understanding was correct—here’s what I got.
What Does Black Swan Mean?
An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict. This term was popularized by Nassim Nicholas Taleb, a finance professor and former Wall Street trader.

Investopedia explains Black Swan
Black swan events are typically random and unexpected. For example, the previously successful hedge fund Long Term Capital Management (LTCM) was driven into the ground as a result of the ripple effect caused by the Russian government’s debt default. The Russian government’s default represents a black swan event because none of LTCM’s computer models could have predicted this event and its subsequent effects.

The ea that I use has around 50% winners. So I get used to a fair succession of losers. A black swan event may just create a longer run of losers. It is also a close of bar type ea so conceivable a –for eg— 300pip drop on along position wouldnt be much fun.
It all comes back to the old equation–high return=high risk and there’s no way around it that I can see.
You could use a capital preservation method whereby ,for eg ,you started with a 10k deposit. Say the ea performed as it has done for a long period of backtesting and you doubled your money. You then removed your initial 10k and traded with “free” money. Any blackswan event that happened after this could perhaps be regarded in a different light.
Ronald–can I ask how you deal with the possibility of a blackswan?

We are all One. Be present. Be the Observer

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