QuoteOriginally posted by: AnalyticalVegaQuoteOriginally posted by: chocolatemoneyQuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: AnalyticalVegaQuoteOriginally posted by: chocolatemoneyQuoteOriginally posted by: farmerQuoteOriginally posted by: AnalyticalVegaForward Testing with Monte Carlo?Easy there, fella. Find someone your own size to pick on. The people who run Monte Carlo need to eat, also.I have never seen anyone "forward testing" a strategy "with Monte Carlo". What the heck does it add to your trading system design?Are you serious? How do you predict your future P&L?Indeed! And how do you know if your strategy development process doesn't have a leak (accidentally using future data to trade the past) or has overfitted the backtest data?@AnalyticalVeg@Traden4Alpha: Literature is rich on the topic, isn't it?Many people use Monte Carlo. Do you have something that works better?If Monte Carlo suits your need, sure, go ahead.My point is: pay attention! You have still to make an assumption on the process and that same assumption may be already embedded in your model. Therefore, forward testing may not help you stretch your assumption and identify those edge cases where things may get very ugly. In other words, over the years, I spent significant time improving on the schoolbook forward testing Monte Carlo, building a richer framework. My all point is not about Monte Carlo, but schoolbook implementation of forward testing with Monte Carlo.Second thing. I see that you have your checklist, which is good. However, you can do all you say and still lose money and maybe do something completely different and bring home your profit.On the same line: You say "Yes. You would need to reconstruct the most likely prices in realtime, so your sample space for your empirical PDF would constantly be changing. The rate of change of the sample space would depend on market conditions which would need to be measured by a bunch of different metrics." If I understand correctly, your algos are real time adaptive and the process for adaptation is adaptive as well and parametric. I can not say it is good or not, but my modeling work in the last years has been focused on simplifying, so my question was: can't you make it simpler?
Last edited by chocolatemoney
on December 8th, 2013, 11:00 pm, edited 1 time in total.