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Monte Carlo simulation does not model serial correlations. This means the numbers coming out in each draw are random; there is no way to control what comes out in the next draw based on what was just drawn. But the market is serially correlated – especially if you are playing it based on momentum. What happens today does influence tomorrow – and what happens to one influences others – we know this instinctively as bull and bear markets.

Using Monte Carlo which infers true randomness (ie coin toss randomness) on a serially correlated data set will underestimate the possible range.

Sure we have been through this – that's right, I don’t understand because I know FA.

The questions I would be asking myself - Has the system got an edge or will it only work in a raging bull market when everything 'long momentum' does? Is the position sizing correct to see me through to the next bull market? or am I relying on a Monte Carlo simulation of drawdown that may be understated because MC doesn't take into account serial correlation? Am I using a market trend filter - Is that the primary importance and individual stock selection secondary to my expectancy?

<blockquote data-quote="craft" data-source="post: 801932" data-attributes="member: 16447">Monte Carlo simulation does not model serial correlations. This means the numbers coming out in each draw are random; there is no way to control what comes out in the next draw based on what was just drawn.&nbsp; But the market is serially correlated – especially if you are playing it based on momentum. What happens today does influence tomorrow – and what happens to one influences others – we know this instinctively as bull and bear markets.Using Monte Carlo which infers true randomness (ie coin toss randomness) on a serially correlated data set will underestimate the possible range.Sure we have been through this – that&#039;s right, I don’t understand because I know FA.&nbsp;&nbsp; The questions I would be asking myself - Has the system got an edge or will it only work in a raging bull market when everything &#039;long momentum&#039; does? Is the position sizing correct to see me through to the next bull market? or am I relying on a Monte Carlo simulation of drawdown that may be understated because MC doesn&#039;t take into account serial correlation? Am I using a market trend filter - Is that the primary importance and individual stock selection secondary to my expectancy?</blockquote>

[QUOTE="craft, post: 801932, member: 16447"] Monte Carlo simulation does not model serial correlations. This means the numbers coming out in each draw are random; there is no way to control what comes out in the next draw based on what was just drawn. But the market is serially correlated – especially if you are playing it based on momentum. What happens today does influence tomorrow – and what happens to one influences others – we know this instinctively as bull and bear markets. Using Monte Carlo which infers true randomness (ie coin toss randomness) on a serially correlated data set will underestimate the possible range. Sure we have been through this – that's right, I don’t understand because I know FA. The questions I would be asking myself - Has the system got an edge or will it only work in a raging bull market when everything 'long momentum' does? Is the position sizing correct to see me through to the next bull market? or am I relying on a Monte Carlo simulation of drawdown that may be understated because MC doesn't take into account serial correlation? Am I using a market trend filter - Is that the primary importance and individual stock selection secondary to my expectancy? [/QUOTE]

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