As systematic and algorithmic traders, we have a number of tools and processes we can use to test and validate trading strategies.
For example, in-sample/out-of-sample testing, walk forward analysis, cluster analysis and a bunch more.
(And don’t forget all the fancy named techniques that have been lumped in with Machine Learning…)
Anyway, one of the tools that we have at our disposal is Monte Carlo analysis.
When you’re using a tool it can be good to understand how it works…
What are its strengths?
What are its weakness?
Today I’m going to share with you a little bit of audio from Dave Walton of Statistrade, explaining the benefits of Money Carlo analysis…
And also a few of the weakness or false assumptions that we really need to be aware of if we want to manage Monte Carlo effectively.
Let’s take a listen to what Dave has for us.
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