Correcting For Input - Tutorial
Previous  Top  Next

TSPE corrects for parameter count and sample size when it accounts for hindsight bias. This is done by replacing every profit shown in the trading record with the profit value divided by the calculation shown for the selected adjustment category. In the event a loss is examined, each loss shown in the trade record is replaced with the product of the loss times the correction category selected. Losses are inflated and profits are reduced according to the correction chosen.

You may select from six different approaches in trade-by-trade degradation by simply clicking on the down arrow opposite the "Total Correction" box and making your choice:

   Total Correction      Calculation

1.   Conservative      N**[(P+1)/(N-1)]
2.   Normal         N**[0.62*(P+1)/(N-1)]
3.   Moderate      EXP**[(2P+1)/(N-1)]
4.   Generous      EXP**[(P+1)/(N-1)]
5.   Aggressive       EXP**[1/(N-1)]
6.   None         1.0

[The EXP term above is the Napierian natural logarithmic base of 2.71828, and ** is the symbol for exponentiation. The symbol P is the integer parameter count and N is the integer sample size.]

Corrections are most severe for the "Conservative" correction and are incrementally less severe for "Normal," "Moderate," "Generous" and "Aggressive," respectively. If no correction is desired, as might be the case for actual market performance, "None" would be chosen. Click [Next] to proceed.