Monte Carlo Trading Simulator

Use this Monte Carlo trading simulator to stress-test a strategy across many possible trade sequences. Enter account size, risk per trade, win rate, average winner, average loser, and number of trades to estimate equity range and drawdown risk.

Best for

Understanding sequence risk, drawdown ranges, and how a trading edge may behave over many trades.

What you get

P10, median, P90 equity paths, profit probability, median drawdown, and simulated equity curves.

Not for

Predicting the exact next equity curve or proving that a small sample strategy is reliable.

Formula

Simulation paths randomize wins and losses from win rate, average winner, average loser, and risk per trade.

Example

A profitable average edge can still hit a bad losing sequence early and fail a drawdown rule.

Hexaplan verdict

Use Monte Carlo to understand sequence risk, not to predict the future.

What is Monte Carlo simulation in trading?

Monte Carlo simulation randomizes the order and outcome of trades based on assumptions such as win rate, average win, average loss, and risk per trade. It shows a range of possible paths instead of one smooth projection.

Monte Carlo trading example

A strategy with positive expectancy can still hit a deep losing sequence early. Monte Carlo helps reveal whether the strategy is likely to survive bad order-of-return outcomes before the edge has time to play out.

Why sequence risk matters

The same set of wins and losses can produce very different account paths depending on order. A poor early sequence can trigger drawdown limits even when the long-term average looks profitable.

How to use this simulator

Enter your starting account balance.
Set risk per trade.
Enter realistic win rate and average R values.
Choose the number of trades to simulate.
Compare P10, median, and P90 outcomes.
Use drawdown results to decide whether risk is too high.

Common Monte Carlo mistakes

Using optimistic win rate assumptions.
Ignoring costs and slippage.
Testing too few trades.
Treating a simulation as a prediction.
Forgetting that market conditions can change.

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FAQ

What does Monte Carlo simulation show?

It shows a range of possible equity paths based on randomized trade outcomes and sequence order.

Can a profitable strategy still fail?

Yes. A bad sequence can create drawdown or account failure before the edge has enough trades to express itself.

What inputs should I use?

Use conservative inputs from a meaningful sample of trades after costs, not best-case backtest numbers.

Is Monte Carlo the same as backtesting?

No. Backtesting replays historical rules. Monte Carlo stress-tests possible sequences using statistical assumptions.

How should I use the drawdown result?

Use it to decide whether your risk per trade is too high for your account, prop firm rules, or emotional tolerance.