In the link below there is an example of EL code for long and short exits (Adaptrade forum): http://groups.google.com/group/adaptrade-builder/msg/54ea799e23c393c9?hl=en The long exit condition is a true monster. Is this an indication of excessive curve-fitting in your opinion? I've never seen such a complicated exit condition before.
Not neccessarily. If you could simplify the math of the exit tremendously and still have almost the same exits, then it might be a valid discovery. That's not always the best way to discover curve-fits, but it's possible that in this case it is. You need statistics.
This is a machine generated pattern, and it looks indeed like the mother of all curve fitting. I think the problem is not that it's a complicated formula, but it seems to depend on price patterns from up to 84 days in the past, which makes no sense. A price pattern algo can not work with a pattern length of more than about 3..4 bars, because the autocorrelation of price series is zero beyond that horizon. This looks like a typical example of how not to use or not to program a price pattern generator.
I didn't spot the 84 days in the past. If that's the case, then yes, it's definitely a curve-fit and jcl is right.
I agree with jcl on this one. It looks to me like this program draws vectors to future high points corresponding to entries and then fits patterns than make the entry profitable. Similarly to what someone would do in hindsight looking at a chart. One way to check these exit conditions for validity is to generate random entries and apply the exits to them. You will find out that after a simulation of about 100 different runs, the returns will average 0 or even turn negative. It looks pretty much like a geek forum there.
Jesus man! This is a curve-fitting monster! Are people that stupid? Oh man, people are that stupid it seems... Go to price action lab blog and look for the post "Fooled by Randomness Through Selection Bias". It included a link to a simulation of a coin toss. Excellent post that shows how curve-fitting causes selection of random systems.
Yesterday in the price action lab blog they issued an alert for going long a stock at the open. (I will not mention the ticker because this is for his customers only). The stock fell a little by the close and I thought that was a losing call. Today the stock soared close to 4%. The signal was from his software. A lot of potential there. There is no indicator curve-fitting - only identification of repeated OHLC patterns. You specify the rate of repetition and the win rate to make this as conservative as possible. The signal yesterday had a win rate of about 77%. pretty good. This is the way to trade.