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August 9, 2013

Trade Simulator

I’ve coded a trade simulator for you at  http://www.toshop go to these guys.com/trade-simulator.cfm   The trade simulator works for any trading system including stocks, futures, currencies and options.  All you need are your win and loss percentages, average profit, average loss and slippage rates.  You can then simulate how these numbers would perform over time.

The trade simulator takes your system parameters and performs random trades and applies your numbers to them.  The result is a simulated performance result of how those trades did.  I find it very instructive to look at the equity chart to see if the equity growth is smooth (ideal) or choppy.  Choppy curves normally mean the results have draw downs.   The bigger the dip, the bigger the draw down.

You can see the exact draw down on the numbers on the right.  I typically like to see these numbers VERY low.  10% of less is my threshold.

The other piece of data I look at is the Probability of Ruin.  I want that as close to 0.0000% as possible.

There are two modes you can use

The first mode is for single trials.  This mode shows more complete data for the trial.  You will see a moving average on the chart.  This shows what the average equity is.  You want this to keep going up.  One technique for managing ANY trading system is to plot a moving average of your equity.  If the equity falls below this moving average, switch to paper trading the system until the equity is above the moving average.  This will get you out of a system that is not performing very quickly and get you back in when it starts making money again!

The second mode lets you do multiple tests.  For example, instead of doing one test for 1000 trades, you can do 10 tests of 100 trades.  This mode plots the minimum and maximum equity and an average of all tests.  For these tests, I want to make sure the minimum values all had a good growth curve.  The tighter the lines are together, the less variation a system has, which is a desirable situation.

 

TradeToolA  TradeToolB

 

I hope you enjoy using the trade simulator.  It’s a good sanity check to see if your trading system numbers make sense or not!

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Tom Nunamaker

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