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Hello. Is there any way to perform a Monte Carlo simulation for a strategy?
I mean results could vary in terms of not filled orders, moving spread, slippage etc.
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Rahul Chowdhury
Hey Ivan,
If you are talking about post-execution analysis, here is a fantastic article about using Monte Carlo simulations to improve your algorithmic trading strategies. He talks about how to perform a Monte Carlo simulation and how to properly use the results to improve your strategy's performance.
With a few backtesting parameters for your strategy like the average win/loss and the average number of trades per year, you can create a Monte Carlo simulation. There is software online that produce the simulations for you. But it is also possible to do it in an Excel spreadsheet. The author of the linked article actually provides his own Excel template for calculating Monte Carlo simulations.
It is also possible to compute real-time Monte Carlo simulations to optimize for anomalous behavior in the strategy. You would follow the same optimization strategies in the linked article but implement them in real-time, possibly in a RiskManagementModel.
Ivan Baev
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
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