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At 06:48 PM 8/4/98 -0400, Bob Fulks wrote:
>Monte Carlo simulations are typically used to find the probability
>distribution of some dependent variable which is a function of several
>inputs, all of which have their individual probability distributions.
>
>It is not real clear to me how you would use this technique to evaluate a
>trading system. The uncertainty in a trading system's future performance is
>mostly related to sequences of future prices, not to the distribution
>functions of prices.
>
>Am I missing something?
>
>Bob
>
Bob
Yes you missed a lot, Monte Carlo simulations are typicaaly used to find
the probability distribution of lose woman in Alabama back in the late
70's. Today it take at least a late model Caddy.
Sorry couldn't resist that one,
Robert
>At 4:26 PM -0400 8/4/98, Cab Vinton wrote:
>>For a while I've been interested in using a Monte Carlo approach with a
>>random system in order to benchmark systems.
>>
>>I'm now beginning to question the usefulness of that approach, however.
>>
>>Let's say you discover after 10,000 simulations that your system is in
>>the top 20 percentile (according to net profit, % winners, or whatever).
>>
>>But what good is this information? As far as I can tell, in using this
>>approach, the better your system, the more curve-fit it is.
>>
>>Am I missing something here?
>>
>>Is there a theoretically sound way to use this methodology to judge the
>>quality of a trading system?
>>
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