Why traders run Monte Carlo simulations
A backtest gives one sequence of trades. The same statistics in a different order can produce a very different equity curve — including drawdowns far deeper than the one you saw. Monte Carlo analysis shuffles your edge thousands of times to show the full range of outcomes.
How to read the results
- Expectancy must be positive. With a 45% win rate and 2R winners, expectancy is 0.45 × 2 − 0.55 × 1 = +0.35R per trade.
- Risk of ruin rises steeply with risk per trade. Compare 1% and 3% risk with the same stats.
- Losing streaks are longer than most people expect: at a 45% win rate, 8–10 losses in a row happen regularly over a few hundred trades.
Get your real statistics from the trading journal or a strategy backtest, and size positions with the position size calculator.
Simulations assume independent trades with stable statistics. Real markets change. Education only.