Monte Carlo: what could go wrong

Your back-test is just one path

Professional - Gold & Platinum

In this lesson

Use Monte Carlo reshuffling of trades to estimate realistic drawdowns, and understand why sample size matters.

Key takeaways

Monte Carlo reshuffles trade order (or resamples trades) to show the range of possible outcomes.
Plan for a bad-case drawdown (e.g. the 95th percentile), not the back-test's single value.
Small samples are unreliable: a 50% win rate over 30 trades can easily look like 35% or 65%.
Prefer strategies with many trades and stable behaviour.

Watch this lesson with Tessa. The full video, worked example, calculator, quiz and Ask Tessa are part of Money Globe X Gold and Platinum. Create your account to start learning.

Next lesson: Analysing your own trading

Educational information only - not financial advice.

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