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Modeling Trading System Performance: Monte Carlo Simulation, Position Sizing, Risk Management, and Statistics
Trading system development, with emphasis on Monte Carlo simulation, position sizing, risk management, and statistics.
400 pages, Paperback
First published May 11, 2011
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Displaying 1 - 2 of 2 reviews
December 16, 2021
Another book which I had high expectations, but it doesn't really achieve it.
It proposes a lot of interesting stuff on the back cover but is somewhat confusing at the beginning and maybe too much theoretical at the end.
Proposes using an objective function that is also recommended on another book from the author, which I agree. Talks about some forms of position sizing, advocating for using fixed size for the sake of knowing if the strategy is broken.
The part where it's better is when it starts to check whether the trading system is broken. One possibility the author says is doing T-Test for the point before the system breaks from a high win rate to a lower win rate and comparing it to when it had lower accuracy. If the latter variance is higher, it's ok, if not, probably is broken. This method can be used only on high accuracy strategies.
Another technique is setting a standard error band or using equity curve moving average crossovers/drawdown limits. Some additional statistics is shown on the book, but with not much info on how to use them to stop trading.
The book is not too much practical, even with the appendix for analyzing your own data on Excel. It could include more examples in-depth for checking metrics, like Jaekle/Tomasini book does.
Estimated reading time: 4h
It proposes a lot of interesting stuff on the back cover but is somewhat confusing at the beginning and maybe too much theoretical at the end.
Proposes using an objective function that is also recommended on another book from the author, which I agree. Talks about some forms of position sizing, advocating for using fixed size for the sake of knowing if the strategy is broken.
The part where it's better is when it starts to check whether the trading system is broken. One possibility the author says is doing T-Test for the point before the system breaks from a high win rate to a lower win rate and comparing it to when it had lower accuracy. If the latter variance is higher, it's ok, if not, probably is broken. This method can be used only on high accuracy strategies.
Another technique is setting a standard error band or using equity curve moving average crossovers/drawdown limits. Some additional statistics is shown on the book, but with not much info on how to use them to stop trading.
The book is not too much practical, even with the appendix for analyzing your own data on Excel. It could include more examples in-depth for checking metrics, like Jaekle/Tomasini book does.
Estimated reading time: 4h
May 24, 2019
The best of the book: the mention of the volatility weighted position size which is based on the ATR and the use of the t-test to measure the system performance.
Displaying 1 - 2 of 2 reviews