Monte Carlo Simulations for Trading Risk Analysis
Monte Carlo simulation is a powerful statistical technique used by professional traders and institutions to model portfolio risk and potential outcomes.
What is Monte Carlo Simulation?
Monte Carlo runs thousands of random simulations of your trading results to show the range of possible outcomes. It helps you understand your risk of ruin and expected performance.
Key Insights from Monte Carlo
- Probability of reaching profit targets
- Risk of significant drawdowns
- Expected performance range (5th-95th percentile)
- Impact of position sizing on outcomes