The Role of Backtesting in Trading System Development by Dr. Howard Bandy
In his presentation, Dr. Howard Bandy will review assumptions common to all technical analysis. A brief discussion of the efficient market hypothesis, who the other traders are, and how difficult developing profitable systems is will follow. Howard will display a graphic explaining the components of a quantitative trading system and a graphic explaining the flowchart of the system development and trading management techniques. He will explain some background about system development and will have a detailed discussion of backtesting. Backtests are always successful -- we do not stop playingv with the system until the results are good. Backtesting is necessary, but not sufficient. Use of a backtest-only system is dangerous. Confidence comes from the validation phase of development. There is a minimum set of skills needed for system development and analysis. These include the ability to program in the language of the development platform, and the ability to apply statistical analysis to test and trading data and interpret the results.
Dr. Bandy is uniquely qualified in technical analysis. His education includes university degrees in mathematics, physics, engineering, and computer science. His graduate work focused on modeling and simulation, artificial intelligence, and statistics. He began applying quantitative techniques to financial markets in the late 1960s while in graduate school.
He continued his academic work, becoming tenured full professor of mathematics and computer science, and university dean. He has real world experience as a software developer, including the design and implementation of a program to select stocks and issue buy and sell orders. He was a senior research analyst at a Commodity Trading Advisor (CTA) firm, where he held a Series 3 license. And he has, and is continuing to, consult with and assist individual traders and trading companies in the design, testing, validation, and analysis of trading systems.
Dr. Bandy is the author of four recently published and best-selling books on technical analysis, including "Quantitative Trading Systems", "Mean Reversion Trading Systems", and "Modeling Trading System Performance." You can learn more about his activities, read free chapters of his books, and follow his blog, at www.BlueOwlPress.com
See you there!