Backtests usually present one historical path. Real trading produces one future path, and it rarely arrives in the order that makes the strategy look clean.
Monte Carlo testing helps ask a better question: if the same edge arrives in a worse sequence, does the account still survive?
What To Measure
A useful drawdown simulation should track:
- peak-to-trough drawdown,
- time under water,
- margin pressure,
- loss streak depth,
- and recovery requirements after large adverse sequences.
The output should inform sizing and shutdown rules, not just produce an attractive chart.