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Compute inferential statistics on all tests, both in-sample and out-of-sample These statistics reveal the probability that the performance observed in a sample reflects something real that will hold up in other samples and in real-time trading Inferential statistics work by making probability inferences based on the distribution of profitability in a system s trades or returns Be sure to use statistics that are corrected for multiple tests when analyzing in-sample optimization results Out-of-sample tests should be analyzed with standard, uncorrected statistics Such statistics appear in some of the performance reports that are displayed in the chapter on simulators The use of statistics to evaluate trading systems is covered in depth in the following chapter Develop a working knowledge of statistics; it will make you a better trader Some suggest checking a model for sensitivity to small changes in parameter values.



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applications or connections with long hold times. Store-and-forward networks, particularly packet networks, work well for short, bursty messages with minimal delay sensitivity. To manage all this, however, is more complicated than it would seem at first blush. First of all, the switches must have the ability to select not only a path, but also the best path, based on QoS parameters. This constitutes intelligent routing. Second, they should have some way of monitoring the network so that they always know its current operational conditions. Finally, should they encounter unavoidable congestion, the switches should have one or more ways to deal with it.





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Data binding is a way to connect data between the user interface and a data source. It is possible to transfer data from a data source to the user interface once or each time the data changes, as well as to constantly keep the data source synchronized with the user interface. The markup extension controlling data binding is named Binding and has four possible syntaxes. Let s imagine the login screen authorizes access to an online bank. After customers log in, they re able to select one of their accounts to manage (and also instantly see their balance for each account), as shown in Figure 2-7.

So, how are routing decisions made in a typical network Whether connectionless or connection-oriented, the routers and switches in the network must take into account a variety of factors to determine the best path for the traffic they manage. These factors fall into a broad category of rule sets called routing protocols. For reference purposes, please refer to the tree shown in Figure 2-32. Once the Transport Layer has taken whatever steps are necessary to prepare the packets for their transmission across the network, they are passed to the Network Layer.

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A model highly tolerant of such changes is more robust than a model not as tolerant, it is said Do not pay too much attention to these claims In truth, parameter tolerance cannot be relied upon as a gauge of model robustness Many extremely robust models are highly sensitive to the values of certain parameters The only true arbiters of system robustness are statistical and, especially, out-ofsample tests ALTERNATIVES TO TRADITIONAL OPTIMIZATION.

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There are two major alternatives to traditional optimization: walk-forward optimization and self-adaptive systems. Both of these techniques have the advantage that any tests carried out are, from start to finish, effectively out-of-sample.

Figure 2-7. Results of data binding Account objects to a ListBox First, add a new class, Account.cs, to the XAMLTour Project. The following is what a simplistic business object for account information looks like: public class Account { public string AccountName { get; set; } public double AccountBalance { get; set; } public Account(string n, double b) { this.AccountName = n; this.AccountBalance = b; } } Next, create a new User Control within the XAMLTour project in Visual Studio and call it ChooseAccount. You can do this by right-clicking the project in the top right and clicking Add New Item Silverlight User Control. Give it the name ChooseAccount.xaml and click OK. Edit the

The Network Layer has two primary responsibilities in the name of network integrity: routing and congestion control. Routing is the process of intelligently selecting the most appropriate route through the network for the packets; congestion control is the process that ensures that the packets are minimally delayed (or at least equally delayed) as they make their way from the source to the destination. We will begin with a discussion of routing.

Examine the performance data, run some inferential statistics, plot the equity curve, and the system is ready to be traded Everything is clean and mathematically unimpeachable Corrections for shrinkage or multiple tests, worries over excessive curve-fitting, and many of the other concerns that plague traditional optimization methodologies can be forgotten Moreover, with today s modem computer technology, walk-forward and self-adaptive models are practical and not even difficult to implement The principle behind walk-forward optimization (also known as walk-forward testing) is to emulate the steps involved in actually trading a system that requires periodic optimization It works like this: Optimize the system on the data points 1 through M Then simulate trading on data points M + I through M + K Reoptimize the system on data points K + 1 through K + M Then simulate trading on points (K + M) + 1 through (K + M) + K.

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