The Monte Carlo Simulation ... it's good but not paranormal

I ran the Monte Carlo simulation I mentioned yesterday and it looked really fantastic ...

But then I found a problem with the program I was running and it's more like this:

The parameters after I corrected the program:

• Start with $100000
• Every week take 1/4 of the stake (i.e. $25000 to start) and trade using that much margin
• Assume a 77% win rate
• Losses cost 17% of the weekly margin
• Wins return 16% of the weekly margin
• Run for 2 years (104 weeks)

Note that this is completely abstract and suffers from the issue that it's not possible to use exactly any amount of margin; you may get only $24000 in margin used instead of $25000.

The good news is that the data we have so far (just a smidgen, that is) was taken at a time of very low volatility (with the market at record highs). This trade may do a bit better with a certain amount of volatility, but it's very happy with the market going straight across too.

With those preambles, here's what the simulation returns after 10000 runs:

• Probability of going broke: 0
• Mean result: $870,055.50
• Standard deviation: $310,804.06
• Minimum: $199,429.98
• Maximum: $2,808,124.00

The maximum and minimums are very unlikely. The largest blob of probability is around the mean:

So there's a 68.26% chance that the ending value is between $560K (up 560%) and $1.18 million (up 1118%).

I'm still testing but starting to put this trade on in a few more accounts and will be getting more results for the next few months. Stay tuned!