P&L Forecasting, 06/22/08
A tool for P&L forecasting based on The Axiom of the Small Edge is here:
Tools: P&L ForecasterGiven historical average trade and standard deviation, the P&L Forecaster will generate and plot a forecast of the next 100 peiods (days, weeks, months, trades, etc.).
The there are three insights to be gained from a forecast (or series of forecasts):
- The journey - the drawdowns and run-ups of the path - is as important as the endpoint
- The slope of the path gives a view to the overall edge
- Varying the average trade and standard deviation, which represent ever-changing cycles and volatility, provide some nice insights into what the journey is likely to be like under different market conditions.
The P&L Forecaster adds insight and understanding to the life and times of a P&L.