E-Mini S&P 500 Futures Contract - Daily Chart Delayed

EminiES System Prediction Envelope

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Prediction Envelope

Date: June 20, 2020

Look Back Period: 11/22/2018

The green envelope shows the range of possible equity curves generated by Monte Carlo analysis by sampling from the trades prior to the last N trades in the sequence. As with the other type of Monte Carlo analysis, this analysis generates three curves: the high confidence is the user-chosen confidence level, the low confidence level is 100 minus the entered confidence level, and the middle curve represents 50% confidence (i.e., the median result). The green envelope is the region between the high and low confidence bands.

 

This envelope represents a prediction for the equity curve over the last N trades. The trades that actually took place are shown overlaid on the prediction envelope. By comparing the actual trades to the prediction envelope, this analysis can be used to determine if the trading strategy is still performing within expected bounds. For example, if the last trade (Red Arrow) in the historical sequence of trades falls outside the lower boundary of the envelope, the trading strategy may need to be re-optimized, or it may be prudent to stop trading the strategy. 

Number of Optimizations Since Inception: NONE

Generally speaking, the better the algorithm the less likely a re-optimization will be needed. If the algorithm is doing well – then the worst thing you can do is modify it to try and squeeze a little more out of the market.  We take pride in our algorithms, in particular from the fact that they have not required optimizations.

S&P 500 Drawdowns