Monte Carlo: a simple way to stress a trading record

[Shadow Trader]

A journal shows one history. The same trades in a different order would have produced a different equity curve.

A Monte Carlo simulation shuffles the trade results thousands of times and plots the range of outcomes. The output answers questions like: what is the worst drawdown that could reasonably occur? How likely is a 20 percent decline? How wide is the range of final results?

The tool exposes how much of a good record owes to lucky ordering. A strategy whose median simulated drawdown is 12 percent but whose worst case is 35 percent needs sizing with the worst case in mind.

Simple versions run in a spreadsheet with random sampling. More advanced ones exist as free scripts.

Results are only as good as the underlying trade list, which should include real costs and be long enough, ideally 200 trades or more.

Has anyone applied this technique to a live record, and what did the drawdown range look like?