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Personally, I wouldn't waste my time.
Jim Bronke
Phoenix, AZ
----- Original Message -----
From: "Ray Gurke" <Ray@xxxxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Friday, April 19, 2002 5:07 PM
Subject: Monte Carlo Simulations
: First.. let me say I am relatively clueless as to the practical usefulness
: of the subject, and am seeking some enlightenment. Does anyone use Monte
: Carlo simulations of trades/equity curve as a useful, practical tool in
: their trading? If so, how? I'm failing to grasp the practical usefulness.
In
: fact, I'm not sure I even agree with the theory in regard to trading, as
it
: applies to profit and drawdown distribution -- but that may be a
different,
: religious issue ;-)
: Specifically... what practical benefit is it to know that there's a
: 5% (or x%) chance my maximum drawdown (or any drawdown) will be exceeded
in
: the next 60 (or however many) days? How does that help you make even one
: decision regarding your trading other than raising a red flag as to when
: your system may/may not be performing within a wide range of
probabilities?
: Believe me, if the 5% max drawdown chance is realized, it's no longer a 5%
: probability, but 100% reality ;-) Does this really provide a better
: analysis than just monitoring your max historical drawdown/profit
: distribution for indications your method is not performing at an
acceptable
: level? Is it supposed to be an indicator of the stability/robustness of
your
: system? If so, I still can't see the value, because you'll only know AFTER
: the fact. Seems to me that if your system/method isn't built on sound
: trading logic (and not overly fitted/filtered), you're only adding another
: layer of obfuscation. And to the contrary, if you've done a decent job
: building a robust system(s), what benefit are these obscure( IMO)
: probabilities?
:
: Confused in Seattle....
:
: Ray
:
:
:
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