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Monte Carlo Simulation
Risk ManagementA statistical method that runs thousands of randomized trade sequences to model the range of possible portfolio outcomes. Reveals the probability of drawdowns, ruin, and target achievement for a given strategy.
Related Terms
Risk of Ruin
The probability of losing enough trading capital to make recovery practically impossible.
Expectancy
A measure of the average amount you can expect to win or lose per trade: (Win Rate x Avg Win) - (Loss Rate x Avg Loss).
Backtesting
Testing a trading strategy against historical data to evaluate how it would have performed.