Van Tharp's equity curve game

[Dan Leontieff]

Hi guys,

I though I'd share an interesting tool I've stumbled across recently.

It's call 'secret of master' trading game, by the van tharp. Essentially this is a user-defined equity curve simulation exercise.

http://www.iitm.com/products/Trading-game.htm

There is a free trial. I don't know that I would necessarily want to pay the full $195 for the full version.

In any event, even playing around with the free version gives a good feel for which parameters produce which types of curves.

My own conclusion from van tharp's game: unless you are taking very aggressive risks (e.g. risking 10-15% of your equity on a trade), the chances of "getting nowhere", over long periods of time, are pretty high.
E.g., start the year with 10K, end the year with 10K.

Of course, it's fun, and your broker may take you to lunch, but does it really work as a business? At least when you are an undercapitalized retail trader.

That's the BIG QUESTION I am struggling with

Dan

[Mindset]

Big Question

Dan

I brought the game and trust me it's worth it.
And you do NOT need to risk 10-15% to get somewhere.

The full "game" ( that's the wrong word but it will do) takes about 5 - 6 hours if you think about and plan it out properly.

It teaches you the holy grail of trading.

[Dan Leontieff]

Mindset, I agree it is a powerful tool, isn't!

It may not necessarily be THE ANSWER to the BIG QUESTION, but it is a very, very good starting point. Definitely something worth looking at very closely, before putting actual hard earned Dollars (or Pounds, for that matter) at stake.

Sure, it's worth the money, I'm just more inclined towards free stuff.

It's not unlike Monte Carlo simulation, you let your trading path "live a thousand lives" and play around with the parameters.

[Mindset]

Free stuff

I admit there is a lot of snake oil out there.

I had to think quite long and hard about it myself - but if you use it properly this really is quite profound because it makes you THINK.

I used to think the next squiggly line on a chart would be "it" - I must have coded up and tested thousands of squiggly lines. Peacefully I no longer do that.

Once you "get" R and I mean really get it - then you can move on to the real test of trading - which is your head!

BTW I have no affiliation with Van Tharp other than I have purchased this and 2 of his books - both of which I would also recommend.

[Dan Leontieff]

R is powerfull stuff, couldn't agree more. I feel like a haven't fully grasped R yet, I am only somewhere in the beginning, seriously.

I guess Van Tharp's simulator is good to get a feel for things, as an approximation. But I also think you need to remember its limitations, there's no laser-like precision here.

In the real life, you don't really KNOW for sure that you have a, say, 60% probability of a 30 point win, and a 40% probability of a 20 point loss.

(Although you can get some idea from here
http://www.hoadley.net/options/barrierprobs.aspx?
for example (and you can get your input for your volatility estimate, say, from ivolatility.com, a free resource)

But it does give you a feel for, say a 'frequent small gains/rare large loss' type of strategy, which makes you feel good, but does not seem to work well over longer periods.

[Mindset]

The game

In the later stages of "the game" you choose your own parameters for win loss / trade distribution.

Finally you don't get any stats and just trade random data with no chart.

It's an interesting learning curve because when you start off you don't believe that's actually possible!

[Trevor.Richter]

Random equity curve generator

This thread died a wile ago, but was interesting to read.

Check out the following (free) equity curve simulator - use at least 100 iterations to get a proper feel for how your parameters might turn out...

http://www.hquotes.com/tradehard/simulator.html