Indices DJIA S&P 500 DAX 30 Nasdaq 100 Nasdaq Comp Nikkei 225 FTSE 100 SMI DJ Stoxx 50 CAC 40 Hang Seng Kospi Nyse Comp AMEX   -     -     -     -     -     -     -     -     -     -     -     -     -     -   10911 1137.4 5732.4 2127.7 2438.1 8981.9 5072.1 4984.1 2161.9 5732.4 19614.7 1817.4 7017.6 2174.7 Commodites Light Crude Oil Brent Crude Copper Gold Pallad Platinum Silver Dow Diamonds QQQQ   -     -     -     -     -     -     -     -     -   83.08 106.28 1.17 1758.7 730.5 1782 38.21 109.16 55.42 Last update: 11-08-2011 14:29:00 (GMT - Live)

What if the Markets Change? Neural network technology and trading systems Profit Target Exits Gunning Slippage Contrarian Trading Testing speed Linear Programming Optimization & Curve-Fitting What if the Markets Change? Monte Carlo Simulations Walk-Forward Testing What are genetic algorithms? A Plan for Identifying and Trading Pullbacks Automated Trading Systems for Financial Markets and Recommendations for Their Usage When developing trading systems, a third assumption of the t-test may be inadvertently violated. There are no precautions that can be taken to prevent it from happening or to compensate for its occurrence. The reason is that the population from which the development or verification sample was drawn may be different from the population from which future trades may be taken. This would happen if the market underwent some real structural or other change. As mentioned before, the population of trades of a system operating on the S&P 500 before 1983 would be different from the population after that year since, in 1983, the options and futures started trading on the S&P 500 and the market changed. This sort of thing can devastate any method of evaluating a trading system. No matter how much a system is back-tested, if the market changes before trading begins, the trades will not be taken from the same market for which the system was developed and tested; the system will fall apart. All systems, even currently profitable ones, will eventually succumb to market change. Regardless of the market, change is inevitable. It is just a question of when it will happen. Despite this grim fact, the use of statistics to evaluate systems remains essential, because if the market does not change substantially shortly after trading of the system commences, or if the change is not sufficient to grossly affect the system’s performance, then a reasonable estimate of expected probabilities and returns can be calculated. More: T H E E N C Y C L O P E D I A O F T R A D I N G S T R A T E G I E S