Analysis
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.
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.
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.
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.
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.
