Monte Carlo Price Forecasts from Normal Returns or Historical Resampling

Summary

This TradingView indicator draws many possible future price paths from a recent window of historical log returns. In Normal mode, it estimates the returns’ mean and standard deviation and samples Gaussian shocks; in Bootstrap mode, it resamples observed returns. Each sampled return is compounded from the current close to produce a forecast path, which the script traces back to the starting point with polylines.

Users can adjust the history window, forecast horizon, simulation count, and random seed. The display can show every path or only the highest and lowest simulated values at each forecast step. The source describes the indicator’s visual output but provides no performance study or evidence that the paths predict future prices. Results depend on the chosen return model and historical sample, and the author notes that drawing many paths can exceed chart loading limits; forcing script load may omit some visuals. The best and worst paths are scenario bounds among the simulations, not probability guarantees.

Key ideas

• The indicator simulates future prices by compounding sampled log returns from the latest close.
• Normal mode draws returns using the historical window’s estimated mean and standard deviation.
• Bootstrap mode draws individual returns from the historical sample.
• The chart can display all paths or the simulated upper and lower envelope.
• Heavy drawing workloads may cause load errors, and the displayed extremes are not forecasts with guaranteed coverage.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.