(Frequently Asked Questions) About MiniMax
Yes, MiniMax was optimized for each market. Optimization is a systematic approach for choosing parameter values for a trading system. Optimization involves iterating through a series of values for each parameter and choosing the values that produce the best results. If done correctly, optimization is an effective way to find good parameter values for a system. If done improperly, optimization can produce an “over-fit” system that won’t hold up well in the future. An over-fit trading system is one that has been tailored so closely to the market data used in the optimization that it only works under those precise conditions. When exposed to other market conditions, an over-fit system will be unprofitable.
There are several factors that determine whether a trading system will be over-fit. One important factor is the number of trades in the optimization relative to the number of rules and conditions in the system. The difference between the number of trades and the number of rules and conditions is called the number of degrees-of-freedom. The more degrees-of-freedom the better. A statistical test can be used to determine if the system is likely to be over-fit on this basis. Generally speaking, the more trades generated by the system, the less likely it is to be over-fit. The recommended markets for MiniMax each generate over 100 trades. On many of the markets, MiniMax produces over 200 trades. With such a high number of trades, the likelihood that the system is profitable due to random chance is quite low, which suggests that the system is not over-fit
Another factor to consider is the time span over which the optimization was performed. It's important that the system is optimized over a wide variety of market conditions. If the system performs well historically over a wide variety of market conditions, it's more likely to perform well in the future. On the other hand, if it's optimized for one particular set of market conditions, such as a bull market, then it may not do well in the future when the market changes. For T-Bonds, MiniMax was optimized over 15 years of data, which covers a very wide set of market conditions. For each market, the system was optimized over as long a time span as possible. Because the two stock index futures (mini Russell and E-mini S&P) have much shorter available histories, the optimization was limited to four years for those markets. However, even in this case, the history includes both bull, bear, and sideways market periods.
For information on trading system optimization, please visit the article archive for The Breakout Bulletin newsletter. There are several past articles on system optimization, including articles from April 2003, May 2003, and November 2004.
your system "short-term." Does this mean it's a day trading system?
In principle, the system could be auto-traded in TradeStation, but since MiniMax is not a day trading system, there is no advantage in doing so. MiniMax gives you all the orders for the next day at the day's close, including both entry and exit orders. Using the TS order bar, you can place all these orders for each market at the start of the day. Exit orders can be placed as contingent orders, such as "one cancels other" and so on. This is a much more reliable method of order placement and execution than auto-trading, which can break down if there's a problem with your internet connection or computer.
MiniMax has been tested on the markets for which performance data is provided (E-mini S&P, E-mini Russell, E-mini crude, T-Bonds, gold). It's likely that the system would perform similarly on related markets, such as natural gas, heating oil, 10 year notes, and currency futures. However, it's up to the user to apply the system to other markets. Because of differences between markets, different parameter values would probably be necessary for other markets.
Yes, MiniMax has recently been updated to apply to forex. The parameter values have been optimized for the following foreign exchange (currency) markets: EURUSD, AUDUSD, and USDJYP.
Sorry. I only have system code for TradeStation. However, the TradeStation (EasyLanguage) code is open and provided in a text file. An experienced programmer might be able to translate the EasyLanguage code to another platform.
is the minimum account size needed to trade the system?
get a refund if it doesn't work?
have any brokers who can trade the system for me?
THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
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