by Justin C. Paolini
Basso Test Variation – Pure Random Random Entry
The first robustness check we performed, was to
make the entry method more random than Basso’s. We ran the iterations again and
the algorithm acted as follows: it randomly extracted numbers from 1 to 20 but
issued a signal only if it hit a "1" (Buy) or "2" (Sell). So this system is
effectively random in time, direction, and price. This system is not in the
market the whole time. We also lengthened the ATR. Instead of using a 10 Day
ATR, which is much closer to the current market’s volatility conditions, we
adopted a 200 Day ATR which should be less biased by volatility clusters in the
data. Also, instead of using a fixed 3*ATR initial & trailing stop, we used
a 1*ATR Initial Stop and a 2*ATR Trailing stop. The idea is to give back less
profit in trending situations, and get out of the market early in choppy
situations.
