Monte Carlo analysis is one of the best methods to back test your trading strategy. Generally Monte Carlo is a technique used to check the outcome by running multiple trials. Monte Carlo analysis will be helpful in finding the possible outcome of your trading strategy. This analysis is used to find the likely probability of an unseen risk in trading the strategy. Let’s see how Monte Carlo analysis using Amibroker is performed.
In stock market Monte Carlo is used to find the probability distribution related to trading strategies. Monte Carlo performs trial runs using your trading strategy (backtested data) and collects statistics. These statistic will help you analyze the trading strategy.
Monte Carlo Analysis Using Amibroker
Amibroker introduced Monte Carlo simulation from Version 5.94. AmiBroker’s built-in Monte Carlo simulator is high speed (30+ million trades per second) simulator that runs series of random trade sequences based on backtest output. It uses high-quality Mersene Twister random number generator.
Monte Carlo simulation runs automatically that will create a series of CDF charts. Monte Carlo simulator is by default available only during portfolio backtest runs.
New settings page has been added to control the Monte Carlo analysis.
- Enable Monte Carlo Simulation – which help you on/off Monte Carlo simulator.
- Number of runs – Here traders can define how many MC simulation runs is done.
- By default 1000 MC simulations run once you run the MC process.
Monte Carlo analysis will help you understand your trading strategy is. Identify the problems with your trading strategy by back testing your strategy using Monte Carlo strategy. Create better trading strategies that will reduces investment risks. Never think that Monte Calro analysis using amibroker will help you correct your trading strategies. It’s just a simple process to test how effective your trading strategy is. In simple words find out the flaws in your trading strategy using Monte Carlo process.