Run a Monte Carlo Simulation Before You Risk Real Capital

Why Monte Carlo matters

Your backtester gives you one path: what actually happened. Monte Carlo gives you thousands of paths: what could have happened given your strategy's win rate, average win, and average loss. The difference is the distribution of outcomes — including the bad ones.

How it works in TradeHook

TradeHook's Monte Carlo engine takes your backtest results (or manually entered stats) and runs thousands of simulated trade sequences. Each sequence randomly draws from your win/loss distribution, reordering trades to simulate different market environments.

What to look at

**Max drawdown distribution**: The worst drawdown across all simulations. The 95th percentile is your realistic worst case.

**Probability of ruin**: The percentage of simulations that hit a total account loss. If this is above 5%, your position sizing may be too aggressive.

**Median equity curve**: The middle path. Reasonable expectation if your strategy performs consistently.

Interpreting the results

If the 95th percentile max drawdown is larger than you're comfortable with, reduce your position size before going live. If probability of ruin is high, reconsider the strategy entirely.

The goal is to go live knowing the range of outcomes — not just the best case.