WickCheck / Trading school / Monte Carlo test
Monte Carlo testAdvanced
Reshuffling your backtest trades many times to see the range of possible equity curves and drawdowns.
What it means
The order of trades in one backtest is luck. A Monte Carlo test shows what could have happened with the same trades in a different order: median result, worst 5% and likely drawdowns.
How to spot it
- Hundreds of shuffled equity curves on one chart.
Common mistakes
- Reading only the median and ignoring the bad tail.
Related terms
Risk of ruinThe chance a run of losses wipes out an account or breaks a loss limit.…Sample sizeHow many trades a result is based on. Small samples can look great or terrible b…DrawdownThe fall from an account's peak to its lowest point before a new peak. Max drawd…
Why most strategies need a human behind the screen
Read the lessonWhat a mechanical test can and cannot tell you about smart money concepts.
Education only, not financial advice. Definitions vary between teachers; these are ours, written for clarity.