How to understand the conflit between performance and monte carlo simulation?

Discussion in 'Strategy Building' started by yoyo2000, Sep 25, 2005.

  1. yoyo2000

    yoyo2000

    I have two systems and I perform them on the same market groups in the same period with the same position sizing rules.
    And run the monte carlo simulations with their relating data separately.Thus I have two performance reports and two monte carlo simulation results.

    the problem is there is a sharp conflit between those performance reports and mc simulations,that's,in performance reports,system A is superior than system B,but in mc simulations,system B is better than system A,how should I understand it?

    and below are those two performance reports and mc simulations:
     
  2. yoyo2000

    yoyo2000

    this is a package including results of A & B's mc simulations
     
  3. Even I had faced a similar question. When I backtested, I got better results and when I ran Monte Carlo, I got results not as good as the backtest. The reason I thought could be, because Monte Carlo picks up trades completely randomly which might not be the case actually. There's not a significant chance of seeing a sharp decline right after seeing a sharp rise. Do share your thoughts.
     
  4. Sergio77

    Sergio77

    MC destroys auto-correlation of returns. Useless...