> ## Documentation Index
> Fetch the complete documentation index at: https://www.questforedge.io/llms.txt
> Use this file to discover all available pages before exploring further.

# Monte Carlo Simulation in Trading

> How Monte Carlo simulation helps estimate the range of equity paths, drawdowns, and losing streaks a strategy can produce.

# Monte Carlo Simulation in Trading

Monte Carlo simulation studies how the same trading system can produce many different equity paths simply because outcomes arrive in different sequences.

Instead of relying on one historical path, many alternative sequences are generated or reshuffled while preserving assumptions about the strategy.

A useful analysis can estimate the distribution of ending equity, possible maximum drawdowns, losing-streak lengths, and the probability of crossing an account limit.

The goal is not to predict the exact future path. It is to understand the **range of plausible paths**.