Advanced risk analysis & backtesting tool for traders & investors. Calculate drawdowns, optimize portfolios & analyze trading strategies with statistical precision.
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Monte Carlo simulation is a statistical technique that models probability of different outcomes in trading strategies. By running multiple random scenarios, it provides insights into potential risks, returns, and drawdowns for strategy evaluation.
This risk analysis method helps traders understand maximum drawdown potential and evaluate strategy performance across different market conditions.
Analyze trading strategy performance across multiple scenarios and market conditions.
Calculate maximum drawdown, profit factor and statistical risk metrics.
Optimize risk per trade based on historical win rate and reward-to-risk ratios.
Evaluate CAGR, volatility and statistical outcomes of trading approaches.
The Monte Carlo simulator uses random sampling to model trading outcomes. It calculates metrics like maximum drawdown duration, profit factor, and Value at Risk (VaR) based on win rate, risk-reward ratio and number of trades parameters.
Everything you need to know about Monte Carlo simulation in trading
Monte Carlo simulation in trading is a statistical method that uses random sampling to model the probability of different outcomes in trading strategies. It helps traders understand potential risks, returns, and drawdowns by running thousands of scenarios with your specific win rate, risk/reward ratio, and other parameters.
Monte Carlo simulation provides statistically robust estimates when based on realistic input parameters. While it cannot predict the future, it gives traders valuable insights into the range of possible outcomes and helps optimize risk management. The accuracy depends on the quality of your input data.
Yes, the EdgeZone Monte Carlo Simulator is completely free for all users. It provides professional-grade analysis tools typically found in expensive trading software, including advanced risk metrics, equity curve visualization, and comprehensive statistical analysis.
For accurate results, you need: (1) Realistic win rate based on backtesting, (2) Average risk/reward ratio, (3) Risk per trade percentage, (4) Number of trades per period, and (5) Starting capital. Optional advanced parameters include streakiness, cost per trade, and market shock probability.
For reliable results, run at least 1,000 simulations. For professional analysis, 10,000+ simulations provide more stable statistics. More simulations give better confidence intervals but take longer to compute. The default 5,000 simulations offer a good balance of accuracy and speed.
Maximum drawdown is the largest peak-to-trough decline in your account balance. It's crucial for risk management because it shows the worst-case scenario you might face. Understanding your potential maximum drawdown helps you size your account appropriately and set realistic expectations.
Yes! Every simulation automatically generates a unique shareable URL. You can copy the link, download chart images, or share directly to social media platforms. Your results include detailed statistics, equity curves, and risk metrics that others can view and analyze.
CAGR (Compound Annual Growth Rate) accounts for compounding effects and provides the annualized return rate. Simple returns don't consider compounding. CAGR gives a more accurate picture of long-term performance, especially when comparing strategies with different time horizons.
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