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Monte Carlo based EA
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gatornuke

Member Since Jul 20, 2011  31 posts gatornuke Jul 20 2011 at 20:45
Hello World!

I've developed a Monte Carlo based EA and have been testing it for some time. This EA uses price statistics to assemble sampling functions that are then used to produce a Monte Carlo simulation of the market on every new bar. The standard deviation from the Monte Carlo simulation can also be used to size positions and extablish TP and SL levels based on any given risk appetite. You can take a look at the experimental history at http://www.myfxbook.com/portfolio/mcnp-ea/138452, although by itself it won't tell you much. You'll also want to take a look at the description and setup of each experiment at my blog at gatornuke.com

I welcome any comments or questions.

fantasykid

Member Since Dec 23, 2010  13 posts fantasykid Jul 21 2011 at 05:20
I have view everything on your blog as well watch your live stream. Very intertesting. I have seen an indicator that shows a guess trend before but never seen it in an EA... Will be watching this blog... Nice results.. seems to good. But what is your stop loss and take profit?

Quick in..... Quick out!!! I don't bite I scalp!!!
gatornuke

Member Since Jul 20, 2011  31 posts gatornuke Jul 21 2011 at 22:03
Yeah, coding these graphics in an EA was not straightforward, but it really adds a lot of value to me. I'm a very visual person and just had to see what the EA was thinking.

The stop loss and TP are currently set at 2 standard deviations from the projected price (95.4% confidence interval). They're the red and blue lines you're seeing in the broadcast. Position size is based on these levels, so that every entry is risking a predetermined percentage of capital. I'm currently using 0.002% per entry and a maximum of 5000 entries, for a total maximum of 10% of capital at risk at any given time. Although I should mention the current EA rarely places more than a hundred or so entries at a time, so it doesn't get anywhere close to that. Also, the bottom two charts are running with no TP and SL just to see what happens.

As you may have noticed, today upon release of the EcoFin Meeting minutes there was a nice jump in the EURUSD. This triggered a number of short entries in the EA. I've noticed that this EA likes to work as more of a spike trader fading the market, as opposed to the other EAs I've tested. This nonetheless seems to work fairly well most of the time, but during big news announcements the price tends to make big moves regardless of the statistical background, and it this EA takes a good beating. I've been allowing this to happen and just witnessing the periodic bloodshed so as not to interfere with the scientific method, but I think the next testing iteration will include a subroutine to disallow entries during important news announcement such as speeches by Bernanke, FOMC/EcoFin minutes, GDP numbers, NFP, etc.

fantasykid

Member Since Dec 23, 2010  13 posts fantasykid Jul 22 2011 at 22:32
Going into Monday well see a lot of movement in the EURUSD... I wonder if you could keep the EA from acting on its triggers if there is a big move in one direction in a short amount of time? Just a thought. Does the EA keep in a trade until the triggers are stopped out or does it get out at a predefined amount of time. Also what is your MM (Money Mangement) belief? Not what is built in to your EA but you personally. I am starting to find out that just lucky guessing in trading but a MM is very important to trading as well. So with your live feed why you have so many of the same screens? cool

Quick in..... Quick out!!! I don't bite I scalp!!!
gatornuke

Member Since Jul 20, 2011  31 posts gatornuke Jul 23 2011 at 04:06
both... There are a total of 6 versions running concurrently in the current experiment, which are the 6 screens you see. The column on the right has positions that will close after 2 hours no matter what, The first row also exits on SL/TP, or when the bias is gone, the second row exits on TP/SL or opposite entry, and the third row does the same as the second, but no SL/TP.

Hope that made sense. Again, these are just tests at this point. Once I'm comfortable that I'm getting good, consistent results, it'll be time to move on to a proof of principle test. I may get there in a couple of months or so.

As for MM, I try to follow the Kelly criterion, which is Winning Probability + [(Winning Probability-1) / Win-to-Loss Ratio]. You can obtain these values after trading for a while, and Kelly will give you the most you should bet as a percentage of principal on every trade. Most people would consider half Kelly to be prudent.

I also went ahead and coded a news avoidance subroutine. Now the question is do i just avoid High importance news, or medium as well? And for how long do I suppress trading? 30 minutes prior? 2 hours after? more? less?
I guess I'll go with -30/+120, medium/high for now and see how it goes.



James_Bond

Member Since Jan 14, 2010  556 posts James_Bond Jul 25 2011 at 16:43

gatornuke posted:
    both... There are a total of 6 versions running concurrently in the current experiment, which are the 6 screens you see. The column on the right has positions that will close after 2 hours no matter what, The first row also exits on SL/TP, or when the bias is gone, the second row exits on TP/SL or opposite entry, and the third row does the same as the second, but no SL/TP.

Hope that made sense. Again, these are just tests at this point. Once I'm comfortable that I'm getting good, consistent results, it'll be time to move on to a proof of principle test. I may get there in a couple of months or so.

As for MM, I try to follow the Kelly criterion, which is Winning Probability + [(Winning Probability-1) / Win-to-Loss Ratio]. You can obtain these values after trading for a while, and Kelly will give you the most you should bet as a percentage of principal on every trade. Most people would consider half Kelly to be prudent.

I also went ahead and coded a news avoidance subroutine. Now the question is do i just avoid High importance news, or medium as well? And for how long do I suppress trading? 30 minutes prior? 2 hours after? more? less?
I guess I'll go with -30/+120, medium/high for now and see how it goes.





Did you post some screenshots? As I don't see any. If you didn't, then please do smiley

gatornuke

Member Since Jul 20, 2011  31 posts gatornuke Jul 25 2011 at 20:40
Check out www.livestream.com/gatornuke. After the annoying commercial, give it a few seconds and you can see the live test broadcast.

And I've decided to go with -120/+120. That way i don't get caught with my pants down having open positions when a news event hits the market (at least in the expiring EAs).

James_Bond

Member Since Jan 14, 2010  556 posts James_Bond Jul 26 2011 at 06:45

gatornuke posted:
    Check out www.livestream.com/gatornuke. After the annoying commercial, give it a few seconds and you can see the live test broadcast.

And I've decided to go with -120/+120. That way i don't get caught with my pants down having open positions when a news event hits the market (at least in the expiring EAs).


Just checked it out - quite hard to view it with the low resolution.
I've also checked your system in your portfolio - have you had positive results with backtests?

gatornuke

Member Since Jul 20, 2011  31 posts gatornuke Jul 26 2011 at 13:13
Because the system uses Monte Carlo, it takes several seconds to produce a projection. It's impractical to do a backtest since it'll take close to as long to execute as a forward test, at least on the 1m timeframe. What you're seeing in the portfolio is the raw data from of all the testing. This testing was designed as a series of experiments, and the goal is not to make as much money as possible (that'll come later), but rather to experiment with various risk settings, different EA versions, and other settings and analyze the data. Check out the analysis at my blog (www.gatornuke.com) to put this data in context.

James_Bond

Member Since Jan 14, 2010  556 posts James_Bond Jul 26 2011 at 17:55
Went over your blog - you're doing a heck of a job documenting it! You must be math guru to have created such ea's. eek

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