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MT:
Here is the quick answer:
History does not re-occur in the same sequence in
the future as it occurred in the past. Thus, correlation,
between markets change constantly.
The "Worst Case Analysis" in TR is the worst case IN HINDSIGHT,
--historically. This is equivalent to basing your trading
account
size on Max DD in the TS reports.
If in the future the loosing runs occur in a different sequence
than
in the past, your Max DD and your "Worst Case Analysis" would
change.
As a matter of fact, your portfolio composition should change
also.
Both TR and Portfolio Stream (RINA) have another significant
error. They compound during the run. Therefore, your 'raw' data
is not raw data at all, but the profit stream is curve fitted to
the the total net equity that existed at that moment in time, in
HISTORIC time.
(This is the reason why some net losing markets seem to 'help'
portfolios. They make one big win at the beginning of the run
and loose all the time after that, yet products like TR and
P.Stream keep them due to the historic timing of their single big
win.)
:-(
Leslie
MT wrote:
>
> Leslie Walko wrote:
> > Both Trading Recipes and Portfolio Stream are based on the
> > erroneous assumption that you can add the output of two or more
> > revenue generating processes together to model a portfolio. Not
> > valid! If this assumption were valid, every mutual fund would
> > have outperformed all other forms of investing.
>
> Hi,
>
> You raise a very interesting point, for practically everyone here. Even
> people who trade just one market (e.g. S&P) usually do so via several
> systems. And ofcourse to those who are trading multiple markets.
>
> I haven't used recent RINA products like PS, but I use TR.
>
> I think in the case of MCS, you're talking about a different aspect of
> the whole problem of correctly simulating the trades of a portfolio
> system. What I THINK you're saying, is "Portfolio MCS" allows one to
> assess the possibility of different outcomes when trading a portfolio.
> Can you please clarify?
>
> In my experience, TR correctly simulates the way you want to trade a
> system on multiple markets, whereas other products didn't (as of 2001
> which was the last time I looked). Like being able to equalise exposure
> across different market and not e.g. just simulated 1-lots in every
> market (1-contract in corn has a very different $-risk than nat.gas),
> manage risk (correlated markets risk, long/short risk, total heat etc).
>
> TR has a feature called "Worst Case Analysis" which re-runs the
> portfolio using every day as STARTDATE, to simulate how history would
> have been, if you had started trading on a different date. I guess one
> can also run an MCS of the daily returns from TR's text output (no MCS
> function included in TR, but everything can be saved in plain delimited
> text files)
>
> What exactly does "Portfolio MCS" do, which can't be done ot is done
> incorrectly with TR (other than the obviously important issue that it
> works directly with TS)?
>
> Regards, M
--
Regards,
Leslie Walko
610-688-2442
--
"Life is a tragedy for those who feel, a comedy for those who
think"
Horace Walpole, 4th earl of Orford, in a letter dated about 1770
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