Monte Carlo Simulation in Forex (User Guide)
Monte Carlo Simulation in Forex (User Guide). You can find Expert Advisor Studio on our website: https://eaforexacademy.com/s/qsJpF.
In this video, we will be discussing the Monte Carlo Simulation in Expert Advisor Studio.
Now, the greatest way to test the robustness of your strategies is by
using the Monte Carlo Simulation. Its main advantage is that it checks if a strategy is over-optimized.
For this purpose, it tweaks certain parts of the history data or the execution of the trades and also changes some of the Indicators' value.
After you automate your strategy and the data a bit and you notice that the backtest still shows good results, then it is very likely to be profitable when you trade it live.
On the other hand, if the strategy fails after your changes, you shouldn't use it in a live trading environment since it's over-optimized.
In other words, it works well only in specific conditions, and when they change, it no longer performs well. You can find the Monte Carlo Simulation by selecting a strategy.
You can access the Monte Carlo tool by selecting a strategy, and once you have it loaded, you can select the Monte Carlo tab.
Now what you'll see is that on the left, we have multiple simulations available.
Firstly, we have randomized history data. Now, what the randomized history data does is it changes the range on a specific number of bars.
Next, we have a randomized spread.
What the randomize spread does is it allows you to choose what value
the spread should have, the range is defined in the settings tab.
Next, we have randomized slippage. Now, slippage is a common thing, and it represents a rapid change in price. Sometimes it is just 1 or 2 ticks
before your broker fills the order, and it gets executed.
The Monte Carlo tool adds slippage in the opposite direction of your order.
So if you go to the settings tab, you can choose the value of the slippage and frequency.
Next is the randomly skipped positions entry.
Now what this will do, is we'll simulate some of the problems you may have. For example, your internet connection goes down, something happens on your computer, and it freezes, or it runs slowly, or your broker might have some technical issues, so it simulates all of those possibilities.
Next, we have randomly skipped position exit, and this is the same just on the exit of a position. Then we have randomly closed the position.
This is not something that happens frequently, but we advise you to stay away from brokers that close your trades for whatever reasons.
Next, we have strategy variations, and firstly we have the randomized Indicator parameters. By default, this is set to off. As you can see here, we have selected it to be on.
And what happens is when you activate it, the tool changes a certain percentage of the values of the strategy Indicators.
Of course, this is just for the duration of the test. After all, if you see that
the profits decrease drastically, or the strategy ends up losing, then you know that it is over-optimized.
And lastly, we have a randomized backtest starting bar. And this is a good way to test your strategy as well. The worst thing it could show you
is that you can blow the whole account if you start the backtest from different data.
So what we're going to do is run the Monte Carlo Simulation now, and we're gonna leave the settings default, and we're just gonna run it with the strategy variations enabled.
So we simply click start, and what you'll see is that very quickly, it runs through all 20. It has validated 16 of the 20.
Our Trading Packages: https://eaforexacademy.com/s/NSsvJ
★ Test EA Studio with a 15-days trial and get the FREE course:
https://eaforexacademy.com/s/qsJpF
� If you have any questions about the Monte Carlo Simulation, please, write in our trading Forum, where you will receive an answer within 12 hours.
https://eaforexacademy.com/s/XzHqM
All our online algorithmic trading courses are available on our website:
https://eaforexacademy.com/s/KPMvz
Let’s connect on social media:
Facebook: https://www.facebook.com/eaforexacademy/
Instagram: https://www.instagram.com/eaforexacademy/
LinkedIn: https://www.linkedin.com/company/33249615/
Twitter: https://twitter.com/EAForexAcademy/
In this video, we will be discussing the Monte Carlo Simulation in Expert Advisor Studio.
Now, the greatest way to test the robustness of your strategies is by
using the Monte Carlo Simulation. Its main advantage is that it checks if a strategy is over-optimized.
For this purpose, it tweaks certain parts of the history data or the execution of the trades and also changes some of the Indicators' value.
After you automate your strategy and the data a bit and you notice that the backtest still shows good results, then it is very likely to be profitable when you trade it live.
On the other hand, if the strategy fails after your changes, you shouldn't use it in a live trading environment since it's over-optimized.
In other words, it works well only in specific conditions, and when they change, it no longer performs well. You can find the Monte Carlo Simulation by selecting a strategy.
You can access the Monte Carlo tool by selecting a strategy, and once you have it loaded, you can select the Monte Carlo tab.
Now what you'll see is that on the left, we have multiple simulations available.
Firstly, we have randomized history data. Now, what the randomized history data does is it changes the range on a specific number of bars.
Next, we have a randomized spread.
What the randomize spread does is it allows you to choose what value
the spread should have, the range is defined in the settings tab.
Next, we have randomized slippage. Now, slippage is a common thing, and it represents a rapid change in price. Sometimes it is just 1 or 2 ticks
before your broker fills the order, and it gets executed.
The Monte Carlo tool adds slippage in the opposite direction of your order.
So if you go to the settings tab, you can choose the value of the slippage and frequency.
Next is the randomly skipped positions entry.
Now what this will do, is we'll simulate some of the problems you may have. For example, your internet connection goes down, something happens on your computer, and it freezes, or it runs slowly, or your broker might have some technical issues, so it simulates all of those possibilities.
Next, we have randomly skipped position exit, and this is the same just on the exit of a position. Then we have randomly closed the position.
This is not something that happens frequently, but we advise you to stay away from brokers that close your trades for whatever reasons.
Next, we have strategy variations, and firstly we have the randomized Indicator parameters. By default, this is set to off. As you can see here, we have selected it to be on.
And what happens is when you activate it, the tool changes a certain percentage of the values of the strategy Indicators.
Of course, this is just for the duration of the test. After all, if you see that
the profits decrease drastically, or the strategy ends up losing, then you know that it is over-optimized.
And lastly, we have a randomized backtest starting bar. And this is a good way to test your strategy as well. The worst thing it could show you
is that you can blow the whole account if you start the backtest from different data.
So what we're going to do is run the Monte Carlo Simulation now, and we're gonna leave the settings default, and we're just gonna run it with the strategy variations enabled.
So we simply click start, and what you'll see is that very quickly, it runs through all 20. It has validated 16 of the 20.
Our Trading Packages: https://eaforexacademy.com/s/NSsvJ
★ Test EA Studio with a 15-days trial and get the FREE course:
https://eaforexacademy.com/s/qsJpF
� If you have any questions about the Monte Carlo Simulation, please, write in our trading Forum, where you will receive an answer within 12 hours.
https://eaforexacademy.com/s/XzHqM
All our online algorithmic trading courses are available on our website:
https://eaforexacademy.com/s/KPMvz
Let’s connect on social media:
Facebook: https://www.facebook.com/eaforexacademy/
Instagram: https://www.instagram.com/eaforexacademy/
LinkedIn: https://www.linkedin.com/company/33249615/
Twitter: https://twitter.com/EAForexAcademy/
