|
PureBytes Links
Trading Reference Links
|
> what benefit are these obscure( IMO) probabilities?
Money management.
Most people can generally agree with the concept that you should never
risk more than X% of your account on each trade. The question becomes
how big is X? Monte Carlo can give you an answer for YOUR account,
trading YOUR system, with YOUR risk tolerance.
> : 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?
You seem confused about the concept. The MC is done during system
development before you ever start trading the system. The practical
benefit comes from deciding how big to trade. Can you handle a 50%
chance of going broke (in return for a 50% chance of getting rich
quick?) Or do you prefer a slow and steady approach with a very small
probability of blowing out the account? The MC can tell you how much
leverage to use to accomplish each of those goals.
It's not for everybody and it's hard to do it right. If you don't
understand it, forget about it. All it will do is confuse you.
--
Dennis
|