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Glossary
Short definitions of risk of ruin and Monte Carlo simulation.
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What is risk of ruin?
Risk of ruin is the chance a trading plan hits a level where you would have to stop. It depends on win rate, risk per trade, and reward to risk.
What is a Monte Carlo simulation in trading?
A Monte Carlo simulation shows a range of outcomes for a trading plan, including a weaker case, a typical case, and a stronger case. It is not one backtest.