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Trading glossary · advanced

Monte Carlo simulation

Shuffling your past trade results thousands of times to see how good or bad the future could be.

The fuller meaning

Reshuffling or resampling a strategy's trade results thousands of times to show the range of possible drawdowns and streaks, not just the one path that happened. Traders size for the bad-luck tail, such as the worst 5% of drawdowns, rather than the single backtest path.

Monte Carlo simulation, also called Monte Carlo.

Related words

at the money · backtest · backwardation · basis · call option · contango · data snooping · delta · edge · entry trigger