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Old 25-12-2014, 10:33 PM
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Default Monte Carlo - Correct Assessment?

I have backtested a strategy on two different symbols. For both of them time frame is different(I backtested them one after the other). One trades on X min time frame and the other on Y min time frame.

I wanted to run a simulation on how this would go when traded together. I couldn't find a direct method of doing so.

So, what I did was I took the % returns from Symbol 1 and the % returns from Symbol 2. Copied them together in an excel file. And ran a Monte Carlo Simulation of them together(So, the assumption is that they retain the position sizing method in their original testing and in the Monte Carlo the both trade at 1:1 allocation on a portfolio level). Can this method be an alternative to backtesting them together(which could be a real pain in the behind if we were to use AmiBroker/NinjaTrader)? Can the results of MCSim be considered for any decision making?

Last edited by NJ23; 25-12-2014 at 10:36 PM.
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Old 27-04-2015, 06:36 PM
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Originally Posted by NJ23 View Post
I have backtested a strategy on two different symbols. For both of them time frame is different(I backtested them one after the other). One trades on X min time frame and the other on Y min time frame.

I wanted to run a simulation on how this would go when traded together. I couldn't find a direct method of doing so.

So, what I did was I took the % returns from Symbol 1 and the % returns from Symbol 2. Copied them together in an excel file. And ran a Monte Carlo Simulation of them together(So, the assumption is that they retain the position sizing method in their original testing and in the Monte Carlo the both trade at 1:1 allocation on a portfolio level). Can this method be an alternative to backtesting them together(which could be a real pain in the behind if we were to use AmiBroker/NinjaTrader)? Can the results of MCSim be considered for any decision making?

What sort of MCS are you running? Are you simulating asset returns?
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Old 29-04-2015, 01:03 PM
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Originally Posted by Oxymoron View Post
What sort of MCS are you running? Are you simulating asset returns?

Yes.
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Old 29-04-2015, 01:22 PM
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Originally Posted by NJ23 View Post
Yes.

By randomly altering the structure, you are removing the inefficiency component you would like to exploit.

Easier solution is you reduce position sizing to half when both symbols are at buy/short mode simultaneously, multiply this with returns, and do a (1+cumprod) of it.
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Old 10-05-2015, 03:24 PM
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Originally Posted by Oxymoron View Post
By randomly altering the structure, you are removing the inefficiency component you would like to exploit.

Easier solution is you reduce position sizing to half when both symbols are at buy/short mode simultaneously, multiply this with returns, and do a (1+cumprod) of it.

Thanks, that should give me returns. Could you explain why reduce position sizing?

Last edited by NJ23; 10-05-2015 at 03:26 PM.
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Old 10-05-2015, 06:10 PM
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Originally Posted by NJ23 View Post
Thanks, that should give me returns. Could you explain why reduce position sizing?

As more securities enter into buy/short mode, % of portfolio you have in one security decreases. Actually, this depends on how you are approaching position sizing.
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Old 10-05-2015, 08:53 PM
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Originally Posted by Oxymoron View Post
As more securities enter into buy/short mode, % of portfolio you have in one security decreases. Actually, this depends on how you are approaching position sizing.

Oh okay. I'm trading 25% of capital on one security. So just the cumulative product should give me what I'm looking for.
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