Monte Carlo Simulation and Portfolio Analysis

Short description: It gives the most profitable and less risky lotsize pattern by ensampling thousands of times with using simulation on the traded pairs.

Modern Portfolio Theory:

Harry Max Markowitz set up the modern portfolio theory over optimum portfolio theory between 1952 and 1959. He had first got the title ‘Doctor’ and many many years later –in 1990- got the Nobel Prize with this Theory. He made the ‘Traditional Portfolio Approach’ down with it .

Modern Portfolio Theory aims to choose and maximize a portfolio by discovering the most profitable but the least risky securities which produce more profit with the same risk level or the securities that are less risky to produce the same profit.

>Monte Carlo Simulation and Portfolio Analysis

Monte Carlo Method is a stochastic ( random input ensampling) method that is for solving a statistical problem and the simulation of it is the virtual figuration. The simulation provides a sequence of results for any problem that is perpetually ensampled with infinite number of inputs.

Monte Carlo Simulation visualize the group of distribution of outputs that are the consequences of variable and uncertain inputs. It makes thousands of calculations depending on the number of uncertainty and inputs belongs to them and hence gives all outputs as a probability distribution. It has a lot of advantages rather than deterministic, one spot or static modellings.

Monte Carlo Simulation

What If Analysis

Short description: What if you do Buy trades only? What if you do not trade in news hours or in certain days but trade only in Asia session? All answers are coming up with WHAT IF.

What If Analysis

There are two methodologies for risk calculation: Quantitative and Qualitative. While Quantitative Risk Analysis uses numerical methods to calculate the risk , What IF Analysis uses Qualitative Method.

Whatif Analiz

Decision Tree

Short description: Grouping winning and losing trades to ocur breakdowns and helps understand the conditions of them.

Decision Tree

Decision Tree Learning is a content that belongs to Machine Learning. It has the same structure a tree has such as branches with leaves. It defines the paths running from the roots through the leaves for each trading class with effects and operations.

Karar Ağacı

Basic Analysis

Short description: which trades coinside with the news and how they are affected?

The Effect of Votatility over Trades

Volatility is the standard deviation of a financial instrument that appears during a time period. It helps calculate the risk of the financial instrument for a certain time period. The volatility on Economy calender means to show the effects of the news/data on currencies.

Fundament Alanalysis - Temel Analiz

Quality of Trades

Any complete trade can be estimated by two basic parameters — Entry quality and Exit quality.

Quality of Trades

Entry quality assumes that a trade did not carry serious risks during its lifetime being in profit most of the time. Exit quality defines the profit percentage fixed relative to the potential maximum profit within the trade’s lifetime. The sum of these parameters provides the general trade quality. Quantitatively, these two parameters can be expressed in the following equations.

Entry quality K(In) = 1/(1 + MАE/Result)

Exit quality K(Out) = Result/MFE

Stress Analysis

Short description: The duration of open losing trades cause psychological pressure over traders. The comfort and stress analysis shows us how easy to win the trades.

Comfort parameter may seem substantial but important for investors. Investors working with Money managers,using automated trading robots or signal providers get stressed when the open positions go negative. If the signal providers would like to become popular and set up a long term relationship with investors, they have to consider this psychological whirlpool. Most of the traders or investors would not prefer suffering this situation and may refuse to work with these systems even though the results are profitable.

How can we define this qualitative stress parameter that is ,indeed, a subjective value? The key factor we have to consider is not the amount of the gain/loss but the duration of trades. We have to calculate the duration of living winning and losing trades. The more time the trade keep on losing the less the investor is in comfort , or vice versa.

How can we define this qualitative stress parameter that is ,indeed, a subjective value? The key factor we have to consider is not the amount of the gain/loss but the duration of trades. We have to calculate the duration of living winning and losing trades. The more time the trade keep on losing the less the investor is in comfort , or vice versa.

The numbers below zero are stress values, the numbers above zero imply the comfort values.

Stres ve Konfor Analizi

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Risk Warning
Trading spot currencies involves substantial risk and there is always the potential for loss. Your trading results may vary. Because the risk factor is high in the foreign exchange market trading, only genuine "risk" funds should be used in such trading. If you do not have the extra capital that you can afford to lose, you should not trade in the foreign exchange market. No "safe" trading system has ever been devised, and no one can guarantee profits or freedom from loss. Past performance is not indicative of future results.

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.

One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

All opinions, news, analysis, prices or other information contained on this website are provided as general market commentary and does not constitute investment advice, nor a solicitation or recommendation for you to buy or sell any over-the-counter product or other financial instrument. Please, ensure you understand all risks and seek independent advice if necessary.