Spreadsheet examples help illustrate the mechanics of the recommended procedures. An effective trading system must also be robust across time. Here the analyst uses one segment of data to develop the timing logic and then applies the same trading rules to a different time frame. In this way the source data that generated the signals are isolated from the proof data that confirm them. The author cites specific procedures for blind testing that will benefit any system trader.
Price shocks are violent gaps and shakeouts that come out of nowhere.
Kaufman has focused more attention on this crucial aspect of price behavior than any other analyst. He stresses that the treatment of price shock is critical to proper system design. If the trading rules have been managed to profit from past price shocks, real-time performance will surely falter. The reason is that price shocks are inherently unpredictable. A trading system that is well and fairly tested should show as many losses as gains from these dramatic but essentially random events.