What are your stats ? Montecarlosimulation of Trading / Moneymangement

[lamishto]

Thank you for everyone for helping me with this. It helps my confidence to know my trading is looking ok in terms of the calculations which I am not too good at if i'm honest.

Thanks to fastcar for promoting the fact I should be trading at 1% to keep drawdowns to a minimum. It has always been my intention to reduce the 1.5% per trade to 1% when my account has grown bigger, so for now I will deal with the added risk of higher dd to grow the account more quickly.

I just wanted to give a little history how I ended up trading my system and would love some input on another aspect of this topic:

Do these figures ACTUALLY help in the real world when markets can change....

Ok before you all start shouting at me, let me explain...

I started to get in to mechanical trading around a year ago and realised this suited my personality better than discretionary decisions. At the time I met another guy who was making very good profits from a method which was using the same structure as mine but he had put a different spin on things making everything 100% mechanical.

I was shown a years period of trading this method and the results were quite simply astonishing...

1255 trades
702 wins (all at 1:1)
402 losses(Cut short to a net 360 (1:1))
151 Breakevens

This meant the winners to losers ratio was nearly 2:1 (1.95)

I honestly thought this was the holy grail. There had never been a losing month and each months profits were amazing. So I put all my time and effort in to it and he took time out to mentor me for endless hours for which I will be forever in his debt.

Now you would think with a sample size of 1255 trades that this was a well robust solid trading system.

I then decided to test the system on the 12 months before the original results had started. This took me many nights of eyestrain to achieve (did this manually, best way to test IMO), everything was done correctly and the data I was using was correct to the best of my knowledge. (Alpari and Oanda)

All of a sudden the win to losses was 1.1:1, there were losing months (3 months in a row!) and it would have been an absolute nightmare to trade. I know there are always drawdowns but for 8 months of the year it struggled severly...

Obviously this is how I ended up where I currently am with my own method of trading, which although hasnt got the high 1.95 ratio as before, has performed well on the last 2 years with the same kind of figures throughout! I still have to find time to backtest 2008-2009 but with live trading taking up my time at the moment it is difficult!

I guess the point of my post is that although we can calculate our expectancys, our profit ratios etc etc etc does it really matter considering the market can change at any time and all of a sudden the trading method you have used for the last year or so just stops working!!!!

Would love some brainstorming here!

Cheers again guys, you lot know your stuff when its comes to math/formulas!

T

what is you're system based on? the one that failed.

 

[fastcar]

what is you're system based on? the one that failed.

Dear lamishto,

Please post here your comments and suggestions related to system statistics, and how to use Monte Carlo simulation to determine proper money management. If you are interested in system development, please PM TJZ to see if he would start a new thread about that. We want to keep this thread on topic. Thank you for your understanding.

Kind Regards,

fastcar

 

[lamishto]

Dear lamishto,

Please post here your comments and suggestions related to system statistics, and how to use Monte Carlo simulation to determine proper money management. If you are interested in system development, please PM TJZ to see if he would start a new thread about that. We want to keep this thread on topic. Thank you for your understanding.

Kind Regards,

fastcar

ok. system statistics. win rate and risk reward. this is all that there is to it. monte carlo simulations , a very good tool to determine the maximum loosing streak . if you can get the maximum loosing streak in 10000 simulations then you can determine the risk per trade. maximum drawdawn for me it's 30% which also means a maximum of 20 loosing trades and so my risk per trade is 1.5%. in my simulations i have never got more then 10 loosing trades. in my backtesting i have never got more than 4 loosing trades . 20 loosing trades are the shut down strategy scenario for me.

 

[fastcar]

ok. system statistics. win rate and risk reward. this is all that there is to it. monte carlo simulations , a very good tool to determine the maximum loosing streak . if you can get the maximum loosing streak in 10000 simulations then you can determine the risk per trade. maximum drawdawn for me it's 30% which also means a maximum of 20 loosing trades and so my risk per trade is 1.5%. in my simulations i have never got more then 10 loosing trades. in my backtesting i have never got more than 4 loosing trades . 20 loosing trades are the shut down strategy scenario for me.

Thanks, Lamishto - this is a great start. It would be really helpful to everyone learning about this topic to have a bit more information. Could you please give us:

Your win rate and your payoff ratio?
What simulation software are you using?
The number of trades in each simulation?
How many signals do you get per week or month?
If you run 1,000,000 simulations, is the maximum number of losing trades much more than 20? (I'm curious how large numbers effect your results).

I like your idea of using half the leverage MC suggests just to be safe. Sounds like you have a good plan. I look forward to more details and thank you for your contribution.

Kind Regards,

fastcar

 

[lamishto]

Thanks, Lamishto - this is a great start. It would be really helpful to everyone learning about this topic to have a bit more information. Could you please give us:

Your win rate and your payoff ratio?
What simulation software are you using?
The number of trades in each simulation?
How many signals do you get per week or month?
If you run 1,000,000 simulations, is the maximum number of losing trades much more than 20? (I'm curious how large numbers effect your results).

I like your idea of using half the leverage MC suggests just to be safe. Sounds like you have a good plan. I look forward to more details and thank you for your contribution.

Kind Regards,

fastcar

my risk/reward is 1/0.9 and winrate is 70%. for simulations i use this excel spreadsheet System Expectancy - Monte Carlo Simulation @ Forex Factory.

 

[fastcar]

my risk/reward is 1/0.9 and winrate is 70%. for simulations i use this excel spreadsheet System Expectancy - Monte Carlo Simulation @ Forex Factory.

Hi Lamishto,

So you have a system with a high win rate, but an upside down payoff ratio. It's so interesting running numbers on systems like this, that the 'Orthodoxy' (trading academies 'gurus', brokers, ad nauseam) proclaim are not proper trading systems.

I simulated your numbers using the simple online tool at automated-trading-systems.com and found that because of the high win rate, your system was able to handle almost 2% leverage with only a 5% chance of a 25% drawdown on 100,000,000 (hundred million) trades. That's actually better than most!

If I might ask, how many trades did you base your stats on? How much opportunity does your system present (number of trades per week or month)? What are your personal objectives with respect to earnings and drawdown per period (week, month, year - no need to list each interval - just the one that has the most meaning for you). These are very interesting items to consider when experimenting with different money management schemes on the simulator.

fastcar

 

[lamishto]

Hi Lamishto,

So you have a system with a high win rate, but an upside down payoff ratio. It's so interesting running numbers on systems like this, that the 'Orthodoxy' (trading academies 'gurus', brokers, ad nauseam) proclaim are not proper trading systems.

I simulated your numbers using the simple online tool at automated-trading-systems.com and found that because of the high win rate, your system was able to handle almost 2% leverage with only a 5% chance of a 25% drawdown on 100,000,000 (hundred million) trades. That's actually better than most!

If I might ask, how many trades did you base your stats on? How much opportunity does your system present (number of trades per week or month)? What are your personal objectives with respect to earnings and drawdown per period (week, month, year - no need to list each interval - just the one that has the most meaning for you). These are very interesting items to consider when experimenting with different money management schemes on the simulator.

fastcar

700 trades on currency instruments from different time periods and different instruments including recent 6 months and 2000 on h1 timeframe. 200 trades on s&p and stocks from 1970 to 2000 on the daily. on the h1 timeframe on currencies i expect around 40 trades/month.

 

[intradaybill]

Hi Lamishto,

So you have a system with a high win rate, but an upside down payoff ratio. It's so interesting running numbers on systems like this, that the 'Orthodoxy' (trading academies 'gurus', brokers, ad nauseam) proclaim are not proper trading systems.

I simulated your numbers using the simple online tool at automated-trading-systems.com and found that because of the high win rate, your system was able to handle almost 2% leverage with only a 5% chance of a 25% drawdown on 100,000,000 (hundred million) trades. That's actually better than most!

If I might ask, how many trades did you base your stats on? How much opportunity does your system present (number of trades per week or month)? What are your personal objectives with respect to earnings and drawdown per period (week, month, year - no need to list each interval - just the one that has the most meaning for you). These are very interesting items to consider when experimenting with different money management schemes on the simulator.

fastcar

HI fastcar,

Do you trust the calculation of this guy? Try something like 0.6 for the win rate and 8.0 for win/loss. That amounts to a profit factor of about 12, found in exceptional trend-following systems. The result for a 100% drawdown is 100% according to that website. This means that either this guy doesn't know what he is doing or people should not trend follow.

 

[lamishto]

HI fastcar,

Do you trust the calculation of this guy? Try something like 0.6 for the win rate and 8.0 for win/loss. That amounts to a profit factor of about 12, found in exceptional trend-following systems. The result for a 100% drawdown is 100% according to that website. This means that either this guy doesn't know what he is doing or people should not trend follow.

hey senior member since 2008 i don't think that you can read. i stated a reward/risk of 0.9 not 8.0.
you said "The result for a 100% drawdown is 100% according to that website. "
what you should have said is that for the best trading system on earth with 0.6 winrate and 8! reward/risk which i have made up the risk of 100% drawdawn is 0% not 100%.
so you want to judge me when you make 2 big mistakes in the same short post. first correct those mistakes and then judge me.

 

[Shakone]

HI fastcar,

Do you trust the calculation of this guy? Try something like 0.6 for the win rate and 8.0 for win/loss. That amounts to a profit factor of about 12, found in exceptional trend-following systems. The result for a 100% drawdown is 100% according to that website. This means that either this guy doesn't know what he is doing or people should not trend follow.

That's not what I get from the website. What risk amt % per trade did you have?

 

[lamishto]

if anyone is interested in excel monte carlo simulator this money management @ Forex Factory is a better version because i think that the first version calculated the profit wrong. now it looks better and it calculates the profit in points of risk%.

 

[fastcar]

HI fastcar,

Do you trust the calculation of this guy? Try something like 0.6 for the win rate and 8.0 for win/loss. That amounts to a profit factor of about 12, found in exceptional trend-following systems. The result for a 100% drawdown is 100% according to that website. This means that either this guy doesn't know what he is doing or people should not trend follow.

Hi Intraday,

You are right, 60% winners with an 8 to 1 win loss ratio has a profit factor of 12. But Lamishto described his system differently than you suggested in your post.

He said he has a 70% win rate, and a .9 to 1 win loss ratio. This system has a profit factor of (.70x.90)/(.30x1)= .63/.30= 2.1. Not bad at all, but not nearly what you claimed. Also, I was not able to duplicate your MC results using the online calculator. I think you need to check that again. We must be very sure of ourselves before dressing someone down! Frankly, I just prefer to try and be nice

Kind Regards,

fastcar

 

[fastcar]

700 trades on currency instruments from different time periods and different instruments including recent 6 months and 2000 on h1 timeframe. 200 trades on s&p and stocks from 1970 to 2000 on the daily. on the h1 timeframe on currencies i expect around 40 trades/month.

Lamishto,

This is really good news, that you should get around 40 trades per month. That will give you a lot of opportunity - a very important part of reaching your trading objective. BTW, have you thought about your objectives? For instance, how much you are willing to lose before 'pulling the plug' on the system? How much do you need the system to return? How many hours would you be willing to devote to earn that return?

fastcar

 

[ronblack]

hey senior member since 2008 i don't think that you can read. i stated a reward/risk of 0.9 not 8.0.
you said "The result for a 100% drawdown is 100% according to that website. "
what you should have said is that for the best trading system on earth with 0.6 winrate and 8! reward/risk which i have made up the risk of 100% drawdawn is 0% not 100%.
so you want to judge me when you make 2 big mistakes in the same short post. first correct those mistakes and then judge me.

He meant the calculations of the automated-trading-system.com website IMO. He was probably just testing the reliability of the tool posted there. It takes little brain to understand that.

Why are you so nervous people? Intra is a good guy.

Post edit: Now that I read even more carefully,Intra wrote:

"Do you trust the calculation of this guy? Try something like 0.6 for the win rate and 8.0 for win/loss. That amounts to a profit factor of about 12, found in exceptional trend-following systems. The result for a 100% drawdown is 100% according to that website."

He wrote: "according to that website". This means you didn't even read carefully what he wrote.

Why is life full of idiots? Someone answer please.

 

[lamishto]

Lamishto,

This is really good news, that you should get around 40 trades per month. That will give you a lot of opportunity - a very important part of reaching your trading objective. BTW, have you thought about your objectives? For instance, how much you are willing to lose before 'pulling the plug' on the system? How much do you need the system to return? How many hours would you be willing to devote to earn that return?

fastcar

1 my worst case scenario is 30% drawdawn. this should not happen . ever (i hope)
2 i prefer not to answer that cause i will be bragging. better then average.
3 i trade the h1 so the schedule is from 7 am to 8 pm with 10 minutes/hour managing trades and checking for signals.

 

[aarbee]

Hi guys,

This is a most interesting subject and I find the discussion very informative.
I am new to this forum so a warm hello to all.
What I would like to know is if anyone has purchased the MonteCarlo simulator TradeSim from Larry Sanders website. The website doesn't seem to have been updated in around 8 years and this is not very conducive to confidence in my mind.
I have many more questions on the subject and will post these in due course.

Best regards

 

[fastcar]

Hi guys,

This is a most interesting subject and I find the discussion very informative.
I am new to this forum so a warm hello to all.
What I would like to know is if anyone has purchased the MonteCarlo simulator TradeSim from Larry Sanders website. The website doesn't seem to have been updated in around 8 years and this is not very conducive to confidence in my mind.
I have many more questions on the subject and will post these in due course.

Best regards

Hello aarbee, and welcome.

I intended to obtain the program, but have been swamped with other projects. I understand your concern, and there is even the distinct possibility that the code will not work accept on machines with XP. However, after reading Sander's white paper, I would not hesitate to obtain the program, if it is still available, and you have an OS of similar age.

Kind Regards,

fastcar

 

[aarbee]

Hello aarbee, and welcome.

I intended to obtain the program, but have been swamped with other projects. I understand your concern, and there is even the distinct possibility that the code will not work accept on machines with XP. However, after reading Sander's white paper, I would not hesitate to obtain the program, if it is still available, and you have an OS of similar age.

Kind Regards,

fastcar

I do not have a machine running on XP. I trialled Larry Sanders TradeSim about 2 years back and was very impressed with it. The only reason I did not buy it is because on his website I couldn't find a link to send him an email plus nobody that I knew had any experience of it.
Today, I saw another simulator called Equity Monaco which is available free on the web. It appears to be similar to TradeSim. I will try it out and find out for myself. If anyone else has tried the Equity Monaco, I will welcome their comments on their experience of it.

Cheers

 

[intradaybill]

Today, I saw another simulator called Equity Monaco which is available free on the web. It appears to be similar to TradeSim. I will try it out and find out for myself. If anyone else has tried the Equity Monaco, I will welcome their comments on their experience of it.

Cheers

The way some of these program do MC simulation is fundamentaly wrong and the results are misleading. In short, a proper MC simulation requires periodic returns of a system and of the security used. Series must be detrended to eliminate serial correlation. A host of other issues. A simulation using random inputs is not necessarily a MC simulation.

 

[charlieflip]

Hello all. Im also a new member. Ive found this discussion also very intruiging.

Can someone tell me (with experience) if this MCsim is good? Also, can I find instructions to it somewhere?

https://www.box.com/shared/9ogdzi1epn