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superfragalist,
you are right. Users have to understand what they do - not only
with "monte carlo simulation", also with system testing, trading and
life...
I've prepared my mcs software in a way, that you can easy test your
system result data with mcs (system simulation) or that you can
easily create mcs data sets of your original OHLC data for further
testing with Metastock (data simulation).
And that you can do it with "absolute" and understandable results
and not with percentage results (90% or so...).
Clearly, it rests the users understanding of statistics, probability
etc. etc. ....
Thank you for your statement!
bye,
zentrader
--- In Metastockusers@xxxxxxxxxxxxxxx, "superfragalist"
<jackolso@xxxx> wrote:
>
> Zen, Monte Carlo simulation is a good adjunct to systems testing. I
> use it occasionally.
>
> There are two main problems with Monte Carlo simulation. The
results
> of a Monte Carlo simulation are only as good as the quality of the
> data that goes into it and the particular simulator design. In my
> experience, I've seen many many problems with both of those.
>
> The second issue is the users understanding of probability. For
most
> people probability is one of the least understood types of math.
> Especially the inference.
>
> If a Monte Carlo simulation says that 90% of the time the tested
> system is going to have a positive equity curve over any ten year
> period, nothing in the Monte Carlo simulation says that out of the
> next one hundred years, the first ten years you trade the system
won't
> be the ten years in which the equity curve is negative. According
to
> the laws of probability you could have the next 3 ten year periods
> with negative equity curves occur right in a row, and then have
> positive equity curves for the next 30 ten year periods after
that. Of
> course anyone trading such a system would have gone broke long
before
> the positive equity curve years kicked in.
>
> Their are a whole host of implications both positive and negative
> about using MC simulations. Most users think MC simulation is
simply
> plug and play. They have no idea of how it works or how the results
> should be analyzed.
>
> It's a great tool in very educated hands.
>
> Thanks for providing some code that let's people give it a try.
Very
> generous of you.
>
>
>
>
>
>
>
> --- In Metastockusers@xxxxxxxxxxxxxxx, "zentrader22"
> <cris.volker@xxxx> wrote:
> >
> > ...and you can add a little bit "Monte Carlo Simulation" to your
> > testing process:
> >
> > http://www.zentrader.de/mcsprocess_e.pdf
> >
> > First, you can add "data simulation":
> > If your system has good system report results not only with your
> > original data, but also with simulated data (which has some
relation
> > or properties of the original data), the system might be more
stable.
> >
> > Second, you can add "system simulation":
> > If the Monte carlo simulation shows satisfying profits and
> > low "account drawdowns" the system might be even a little bit
more
> > stable and you can think about to trade it.
> >
> > Only my two cents.
> >
> > I've put the freeware version of my product "Zen Monte Carlo
> > Simulator v3" in the Files section of this Forum. You can
download
> > it also from my website:
> > http://www.zentrader.de/download.html
> >
> > ...and if you think, this idee is useful, you can also buy a
> > professional version:
> > http://www.zentrader.de/zen_mcs_english.html
> > :-)
> >
> > But pay attention:
> > These are (in my opinion useful) tools to decrease your risks
and
> > improve the quality of your system development process. But
there's
> > always a risk concerning trading, which cannot be avoided thru
any
> > system or method - that's life!
> >
> > bye,
> > Volker
> >
> > www.zentrader.de
> > mail to: info@xxxx
> >
> >
> >
> >
> > --- In Metastockusers@xxxxxxxxxxxxxxx, "superfragalist"
> > <jackolso@xxxx> wrote:
> > >
> > > Okay, Scott, If you take a look at Quantitative Trading
Strategies
> > by
> > > Lars Kestner, you see many many tests of various indicators and
> > > trading systems from Lars and others. He provides charts
showing
> > how
> > > each system performed over a ten year period. His charts
illustrate
> > > the problem with relying on TA for your trading. You will see
that
> > he
> > > could not find a stock trading system that showed any
consistency
> > > across more than a couple of years. In addition, if you
> > historically
> > > test a system, the historical results have nothing to do with
what
> > is
> > > going to happen next year. There is no predictabilty value
except
> > over
> > > very long time frames.
> > >
> > > Your test system could show you would have made 5000% last
year,
> > and
> > > then when you trade it this year you could lose 5000% this
year.
> > >
> > > Assuming that back testing is relative to future performance,
if
> > you
> > > back test your system year by year, instead of over many years
at a
> > > time, you can put plot the performance of each year and you'll
see
> > the
> > > risk of trading the system more clearly.
> > >
> > > If you want to make money every year, you have to either
develop a
> > > strategy that's not based on a system of indicator but rather
on a
> > set
> > > of market conditions, develop a strategy which is not
dependent on
> > TA
> > > alone, or develop a strategy that employs multiple systems
> > > simultaneously across multiple markets. However, if you use
the
> > last
> > > strategy your overall returns, while possibly positve, will be
> > diluted.
> > >
> > > Most traders learn all of this the hard way.
> > >
> > > Based on what I've said, throwing out last year's losers may be
> > > throwing out this year's winners.
> > >
> > > Just because a system failed to work on a stock the last three
> > years
> > > doesn't mean it won't work on a stock the next three years.
> > >
> > > If you just want to create a file with the magical results in
it,
> > you
> > > sort the systems test results, highlight the ones you like and
copy
> > > them to the clipboard, open excel, paste them in, copy the
column
> > with
> > > the symbols in it, open word, paste the symbols in as
unformatted
> > > text, use the replace function to replace the paragaph marks
with
> > semi
> > > colons and then copy and paste that list into MS to create a
> > history
> > > file. Download the historical data and now you're ready to
make
> > your
> > > fortune. It only takes about 10 minutes.
> > >
> > > Good luck!
> > >
> > >
> > >
> > > --- In Metastockusers@xxxxxxxxxxxxxxx, "Scooter"
<mariani@xxxx>
> > wrote:
> > > > Super,
> > > > I did read Mr. Wright's series of articles as you suggested
> > > previously. I
> > > > found it very informative. I found that I was already doing
many
> > of the
> > > > things he suggested in developing a system. I have applied
many
> > of
> > > the ideas
> > > > he talked about since reading the articles, more like a book!
> > > >
> > > > He does not address the validity of throwing out losers,
based
> > on a
> > > system
> > > > test, from an available list of potential stocks to trade.
> > > >
> > > > I know there are a cagillion system developing books to
read. I
> > will
> > > pick up
> > > > a few to read when I have the time.
> > > >
> > > > Can you C&P system test results from MS8.0?
> > > >
> > > > Scott
> > > >
> > > >
> > > > -----Original Message-----
> > > > From: superfragalist [mailto:jackolso@x...]
> > > > Sent: Wednesday, April 13, 2005 8:34 PM
> > > > To: Metastockusers@xxxxxxxxxxxxxxx
> > > > Subject: [Metastockusers] Re: System Tester Results (Redu)
> > > >
> > > >
> > > >
> > > > Looks like you're using the systems tester without much
> > knowledge of
> > > > systems development.
> > > >
> > > > Read a few books on system design and then you'll see
you're
> > wasting
> > > > your time.
> > > >
> > > > There's a very good article on this coming up in the May
issue
> > of
> > > > Roy's newsletter.
> > > >
> > > > Don't ask for book recommendations because one book won't
do
> > it.
> > > > You'll need to read around a dozen or so systems
development
> > books to
> > > > get a really good take on how things work. Once you've
done
> > that,
> > > > you'll soon figure out that using TA by itself is not the
best
> > method
> > > > for picking stocks to trade, the performance of any system
> > based on TA
> > > > is going to dramatically change each year with a lot of
losing
> > years,
> > > > there are no indicators that work even reasonably well
across a
> > > > variety of stocks or in changing market conditions, and
> > searching
> > > > thousands of stocks every night for something to trade is
in
> > the long
> > > > run a losing idea.
> > > >
> > > > Does that mean you can't make money using TA. You can, but
you
> > have to
> > > > have a well thought out strategy and apply the strategy
> > appropriately
> > > > for the market conditions.
> > > >
> > > > I'm amazed at how many people that refuse to spend a dime
on
> > > > education, information, good data or anything else that
might
> > help
> > > > them, but they'll pay a guru thousands for useless trading
> > methods or
> > > > lose thousands more making bad trades. It's baffaling.
> > > >
> > > > You can read Charlie Wright's series of articles called
> > Trading as a
> > > > Business. That will give you some basics about how to
approach
> > this.
> > > > Read all the articles in the series. They all have
something
> > important
> > > > to say.
> > > >
> > > > http://www.elitetrader.com/tr/index.cfm?s=17
> > > >
> > > > Give Roy's newsletter a try. It's all about MS with the
code
> > for
> > > > everything discussed in it. You'll learn more from that in
a
> > few hours
> > > > of reading the back issues than you will from playing with
the
> > systems
> > > > tester for next few years.
> > > >
> > > > www.metastocktips.co.nz
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > > --- In Metastockusers@xxxxxxxxxxxxxxx, "Scooter"
> > <mariani@xxxx> wrote:
> > > > > O.k.,
> > > > > I have finally cooked the indicators enough (nothing
new) to
> > come up
> > > > with a
> > > > > system that is profitable over several different period
back
> > tests,
> > > > at least
> > > > > in MS. My question is, do I remove the loosing or zero
trade
> > tickers
> > > > from my
> > > > > potential list of tradable tickers I will run my
Exploration
> > on when
> > > > looking
> > > > > for a new trading opportunity? MS seems to be keen
> > on "cleaning
> > > up" by
> > > > > removing the losers. Doesn't make sense to me to say
because
> > the
> > > > tickers did
> > > > > not hit or make a profit over x amount of periods they
will
> > not
> > > make a
> > > > > profit in the future. Or does it increase my potential
> > > profitability by
> > > > > removing them? Can I somehow export the remaining ticker
> > symbols to
> > > > excel or
> > > > > csv so I can adjust my HSQuote list accordingly?
> > > > > Thanks, Scott
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > ---------------------------------------------------------------
----
> > ---------
> > > > --
> > > > Yahoo! Groups Links
> > > >
> > > > a.. To visit your group on the web, go to:
> > > > http://groups.yahoo.com/group/Metastockusers/
> > > >
> > > > b.. To unsubscribe from this group, send an email to:
> > > > Metastockusers-unsubscribe@xxxxxxxxxxxxxxx
> > > >
> > > > c.. Your use of Yahoo! Groups is subject to the Yahoo!
Terms
> > of
> > > Service.
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