|
PureBytes Links
Trading Reference Links
|
Hello QT,
I was hoping you would join the party.
I have been speculating about this concept but so far I haven't cone
up with any references.
Any chance that you know a website or author who discusses this?
BrianB2.
--- In amibroker@xxxxxxxxxxxxxxx, "quanttrader714"
<quanttrader714@xxx> wrote:
>
> One way to approach this is with a form of the block bootstrap, by
> resampling blocks of consecutive observations of random length
with
> replacement.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "sebastiandanconia"
> <sebastiandanconia@> wrote:
> >
> > I only offer this as a consideration when using such testing,
not as a
> > criticism of Monte Carlo Simulations. A subtle but significant
point
> > (IMO) when using MCS: They may or may not be applicable to
> > trading/investing, because the markets don't always behave
randomly.
> >
> > An example of when a MCS would clearly be appropriate: Let's
say you're
> > a defense contractor manufacturing a part for the International
Space
> > Station. The part is critical, but because of limitations in
> > engineering technology it has a high failure rate, and there's
no way of
> > forecasting in advance if a part will fail. However, although
the
> > failure rate is high, it's also very consistent. Until
technology
> > advances sufficiently the only practical solution is to keep
plenty of
> > spares on-hand.
> >
> > A MCS could tell you what the optimal number of spares to keep
on-hand
> > would be. The part failures are random, but MC could tell you
the
> > likelihood of two, three, five, ten, etc., consecutive
failures. You
> > might determine that there would only be a 1/100,000 chance that
6
> > spares in a row would fail, so you might advise NASA to stock at
least 6
> > spares at all times.
> >
> > Some trading systems, though, will be successful because they
take
> > advantage of repeating sequences of events, not random events.
Business
> > cycles go through a specific sequence, company growth follows a
certain
> > pattern from infancy to maturity, price trends/reversals follow a
> > sequence, etc. If trades based on reliable, repeating patterns
are
> > taken out of order by a MCS such that a massive drawdown or a
> > bankrupting series of losers occurs, that can distort the value
of the
> > trading method by putting the trades in an order that wouldn't
occur.
> >
> > Soapbox alert!:) Another reason that "Why does it work?" is
such an
> > important question with trading systems, since a good answer to
that
> > question can lead to a good answer for another important
question, "When
> > WON'T it work?"
> >
> >
> > S.
>
Content-Description: "AVG certification"
No virus found in this incoming message.
Checked by AVG Free Edition.
Version: 7.1.409 / Virus Database: 268.14.11/542 - Release Date: 11/20/2006
|