TradeStation Walk-Forward Optimizer

Monte Carlo Analysis

When viewing the results of a Walk-Forward Analysis, the Monte Carlo tab lets you perform a Monte Carlo Analysis (MCA)  to be able to evaluate alternative statistical outcomes drawn from the historical data distribution.

Monte Carlo Analysis in the Walk-Forward Optimizer allows you to re-sample percent returns for a specified walk-forward equity curve or cluster analysis containing multiple walk-forward equity curves. This type of simulation lets you see what alternative possibilities and scenarios exist for different parameters, including drawdown, and total return on equity within the same statistical characteristics of returns.

The Monte Carlo Analysis graph allows you to view and evaluate the probability of achieving a certain return or drawdown. For example, the graph above indicates a 90% probability of achieving a total return of 11%.

The selections above the graph allow you to customize the information displayed in the Monte Carlo Analysis:

Settings  
Results  

The Results matrix shows the simulation results for mean and standard deviation for total return, average return, maximum drawdown, and the longest period between equity peaks, i.e., longest drawdown.

Run Monte Carlo Simulation - Clicking this button performs the Monte Carlo Analysis using the specified settings and displays values in the Results table as well as displaying a probability graph.

You can also perform a Monte Carlo analysis concurrent with a WFO (see Monte Carlo Walk-Forward Analysis).