Trading Equity Curve Simulation

Monte Carlo simulation for trading strategy analysis

Simulation Parameters

Running simulation...

Results

Start Balance:
$10,000
End Balance:
-
Return (Compounded):
-
Return (R):
-
Expectancy:
-
Max Drawdown:
-
Max Consecutive Wins:
-
Max Consecutive Losses:
-
Start Balance:
$10,000
End Balance:
-
Return (Compounded):
-
Return (R):
-
Expectancy:
-
Max Drawdown:
-
Max Consecutive Wins:
-
Max Consecutive Losses:
-
Start Balance:
$10,000
End Balance:
-
Return (Compounded):
-
Return (R):
-
Expectancy:
-
Max Drawdown:
-
Max Consecutive Wins:
-
Max Consecutive Losses:
-

Trading Equity Graph Result

Probability Analysis

Probability of Loss
-
Probability of Small Gain
-
Probability of Medium Gain
-
Probability of Large Gain
-

What is Monte Carlo Simulation?

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Monte Carlo simulation uses random sampling to model the range of possible outcomes for your trading strategy. Instead of just calculating theoretical returns, it runs hundreds of different scenarios to show you what could actually happen in real trading.

This tool runs 1,000 different trading sequences using your parameters, then analyzes the results to show you the best case, worst case, most probable outcome, and everything in between. This gives you a realistic view of your strategy's risk and reward potential.

How to Use This Tool

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Step 1: Enter your strategy's historical performance metrics (win rate, risk/reward ratio, risk per trade).

Step 2: Set your planned number of trades and starting capital.

Step 3: Click "Run Simulation" to see 1,000 possible outcomes.

Step 4: Review the Best, Most Probable, and Worst case scenarios in the Results tabs.

Step 5: Check the Probability Analysis to understand the likelihood of different outcome ranges.

Understanding Key Metrics

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Return (Compounded): Your total percentage gain/loss with position sizing that grows as your account grows.

Return (R): Total R-multiples gained. This is position-size independent and shows pure strategy performance (e.g., +15.3R means you made 15.3x your initial risk amount).

Expectancy: Expected return per trade in R-multiples. Positive expectancy means your strategy has an edge. Calculated as (Win Rate × Avg Win) - (Loss Rate × Avg Loss).

Max Drawdown: The worst peak-to-trough decline in your account. Critical for risk management - shows how much you might lose before recovering.

Max Consecutive Wins/Losses: Longest winning and losing streaks. Helps you prepare psychologically for inevitable rough patches.

Common Interpretation Pitfalls

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Overconfidence in Best Case: The best case scenario has only a small probability of occurring. Don't plan your finances around it.

Ignoring Drawdown: Even profitable strategies can have significant drawdowns. Make sure you can psychologically and financially handle the worst case.

Static Parameters: Real trading performance varies over time. Your win rate and R:R ratio may change with market conditions.

Position Sizing Assumptions: This simulation assumes you'll maintain consistent position sizing. In reality, fear and greed often cause traders to deviate.

Sequence Risk: Bad luck early in your trading career (consecutive losses) can severely impact your results due to compounding effects.

How Metrics Are Calculated

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Expectancy Formula: (Win Rate × Average Win R) - (Loss Rate × Average Loss R)

Max Drawdown: Calculated as the maximum percentage decline from any peak to subsequent trough during the trading sequence.

Return (R) Calculation: Sum of all individual trade R-multiples. A +2R win and -1R loss = +1R total.

Compounded Return: Uses variable position sizing where each trade risks a percentage of the current account balance.

Probability Ranges: Dynamically calculated based on actual simulation results, then divided into meaningful brackets (Loss, Small Gain, Medium Gain, Large Gain).