Better to eliminate costly trading rules pre or post optimisation?

[emretezel]

Hi Rob,

Do you recommend eliminating costly trading rules before forecast weights optimisation by using ceiling_cost_SR or post optimisation by using forecast_post_ceiling_cost_SR?

Best,
Emre

[robcarver17]

Well I don't optimise, which means I use post as that also works on fixed weights. The other advantage of using post is that you can use pre-cost information from all instruments in determining the correct weights, and then strip out the weights that are too expensive for a given instrument.

The advantage of pre- would be if you thought there were some weird interaction between pre cost returns and costs, and so you wanted to isolate only instruments that could trade a given set of trading rules cheaply enough.

Obviously this will also interact with the way that you are using costs in your optimisation, so RTFM, the many blog posts on the subject, and also my books.