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It's a shame that the artist called Antonio Stradivari (1644-1725) didn't have a need to tell the world. Three hundred years later we still can't build violins that match his. He took the secrets of his art, to the grave.

Thanks for a thoughtful reply.

Do you worry that the margin requirements are not set by the collective actions of all market participants, and are therefore not "correct" in the sense of Adam Smith's Invisible Hand? Margin requirements are set by the exchange. They can be modified at-will, whenever the exchange wishes...

http://tinyurl.com/39oc3l

The math guys call it "Nonlinear Optimization" and the most famous algorithms to do it are calledDavidon-Fletcher-Powell Levenberg-Marquardt Polytope-Simplex Simulated AnnealingSource code for these is in the book Numerical Recipes

There is a pretty comprehensive effort to provide anonymous internet surfing, whose epicenter seems to be in Europe. Put the three letter word TOR into your search engine and poke around, it's interesting. Tor has an entry in Wikipedia, and the Tor home page is here. Happy studying!

First figure out what you want. Do you really WANT to measure "risk"? Or do you want to measure "pain" so you can compute a gain-to-pain ratio? Some of the more common measurements of "pain" include standard deviation of returns, downside deviation of returns, maximum drawdown, Ulcer...

No, the right way to do it is to calculate ten floating point numbers which represent the average (reward/risk) ratios of the ten random trading experiments. Now compare the magnitudes of these floating point numbers. A crude but effective rule of thumb is that the error tolerance of a Monte...

Example 1 Starting Balance 100,000 Profit 5,000 Perf Fee (20%) -1,000 HWM 104,000 New Deposit 900,000 New Balance 1,004,000 Adjusted HWM ???,??? Example 2 Starting Balance 1,050,000 Loss...

A key question is: how many random trades do you need, in order to generate a "high confidence estimate" of the profitability of random trading? I suspect most people would agree thatOne random trade is too few Ten billion random trades is more than enoughThe right answer is somewhere in...

You could write a little computer program that calculates the probabilities directly. The simplest approach is to make a finite state machine with three states: (1) Start; (2) LastTradeWasWin; (3) LastTradeWasLoss. I cobbled up just such a program, launched it, and went to eat breakfast...

Trading in Choppy Markets, by Robert M. Barnes

http://abcnews.go.com/Business/wireStory?id=2721879 Google to Open New Stock Option Market By MICHAEL LIEDTKE AP Business Writer SAN FRANCISCO Dec 13, 2006 (AP)— Google Inc. employs a lot of brilliant minds, but even smart people have trouble figuring out how much their stock options...

Maybe it would be worthwhile to write (or commission someone to write) software that creates the ratio adjusted contracts you want, starting from raw contract data. Then you could use any data vendor who supplies raw contracts. It would probably widen the universe of possibilities.

One important industrial application of MC simulation is Design For Quality. Tolerances of individual components ("parts") of an end product are expressed as probability distributions, and MC simulations randomly assemble billions of end products from the variable components. The goal is to...

Pinnacle Data rolled from Dec06 to Mar07 corn on Wednesday Nov 22nd. http://www.pinnacledata.com/clc.html

There's a fairly old book about computerized technical trading, which focuses on the futures markets. You might find it irrelevant because it was published in 1992. Or you might discount it because you don't trade futures. However, the book (link) does contain an interesting paragraph on page...

The standard dodge is to provide a "translator" which converts language X programs into language Y programs.

The entire Index of the book is available on Amazon, pull it up and take a look. (Hover the mouse over the "Search Inside" thumbnail image of the cover and a menu pops up. Choose "Index") You can tell which book is his first one, by looking at the publication dates. 2000, 1999, and 1997. Bingo.

I got it too. How flattering.