February 28th, 2012, 4:02 pm
QuoteOriginally posted by: yugmorf2There is no 'optimal', since the answer depends on many factors, not least of which include; asset class, execution speed, and trading costs. Nor, is it likely to be stable, since what might work in one regime might not work in another (eg high/low volatility).For marketing purposes, a sometimes used practice is to try lots of different window sizes and then present the one that gives the best performance, but without understanding what was driving that performance (eg say if it was due to some special circumstances specific to that time period, and those circumstances are not likely to persist). This is one reason why back-tested performance cannot always be trusted as an indicator of live trading performance.Good luck!All good comments. I will just add, that there is some theory, too, under the rubrik of 'optimal filtering'.An example of optimal filtering theory is Nelson & Foster. To the extent that you really understand what is driving your observations, there could be a rationale for a particular window size.
Last edited by
Alan on February 27th, 2012, 11:00 pm, edited 1 time in total.