Is there a strength that does not break even if you swap the order of trades

Introduction

In the previous article, we explained the reason for dividing the period in the first test, “IS/OOS split.” This time, we will discuss the second test, the “Monte Carlo Shuffle.”

What is Monte Carlo Shuffle

In this test, we repeatedly randomize only the “order” of a sequence of trades that actually occurred (records of wins and losses). The content of the trades (wins/losses and profit/loss magnitudes) is kept the same; only the ordering is shuffled.

Then, for each shuffled pattern, we recalculate the asset progression and verify whether the result might have been due to a fortunate ordering.

Why is it necessary to shuffle the order

Even with the same combination of wins and losses, the way asset progress graphs appear can change significantly depending on the order in which they occur. For example, whether large losses cluster in the latter half or the early part can drastically affect the impression of drawdown along the way.

If the losses are merely distributed in a favorable order by chance, it may indicate that the results are largely due to luck rather than skill. By repeatedly shuffling the order to check, and seeing whether the tendency to stay intact persists, we are determining whether the results depend on the order of events or not.

What this test teaches

What we look for in this test is not only the average outcome’s goodness or badness. We assess whether there is a sense of “stability” that remains intact even when the order is changed. Without this perspective, you might miss that seemingly good performance was actually supported by only a very specific ordering.

What I’ve felt so far

Within the seemingly simple act of shuffling the order lies an important meaning: separating luck from ability. In the next article, we will discuss the third test, “Random Comparison,” and how it compares to guessing.

Disclaimer

・The content shared here is not intended to recommend specific trades or provide investment advice. It is for information sharing only.

・Verification results based on past data do not guarantee future results. Markets are always changing.

・Whether you actually execute trades is your own responsibility.

・The indicators and tools introduced in the future are one of the materials to view the market; using them does not guarantee profits.

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