What does the trading risk simulator do?

It runs the same trading plan, with your win rate, average win and loss and risk per trade, through many hypothetical traders at once. Each one gets a different random order of wins and losses. The spread of their results shows how much of an outcome comes from the plan and how much from luck.

R is the amount you risk on a trade: the loss you take if your stop is hit. A win of 2R makes twice what you risked, and a loss of 1R loses exactly what you risked. Measuring trades in R lets you compare them regardless of account size or market.

How is expectancy calculated?

Expectancy = win rate × average win − loss rate × average loss, in R. A 45% win rate with 2R average wins and 1R average losses gives 0.45 × 2 − 0.55 × 1 = +0.35R per trade. Multiply by the amount risked to get a currency figure.

Why do accounts with the same edge end up so far apart?

Because the order of wins and losses is random. Over a few hundred trades, some traders get long losing streaks early and others late, and with risk set as a percentage of the balance those streaks compound. The median shows a typical path; the bands show how wide luck can push it.

The fall from an account's highest point to a later low, as a percentage of that high. The simulator records each trader's largest drawdown and reports the median and the worst 5%, plus the share of traders whose drawdown reached your threshold.

Is this a risk of ruin calculator?

It answers a practical version of the same question: how likely is a drawdown of a given size with this plan and this risk per trade? Set the threshold to the drawdown you would not tolerate, for example 20% or 50%, and read the probability.

Can a simulation tell me what my results will be?

No. It is a hypothetical illustration. It assumes every trade is independent and every win and loss is exactly its average, and that your win rate and averages stay the same. Real results also depend on costs, slippage, gaps, changing markets and how you behave during a losing streak.

Tools › Trading risk simulator

Trading Risk Simulator

Run one trading plan through 1,000 hypothetical traders and see the range of outcomes: ending balances, drawdowns and losing streaks. Same edge, different luck. Change the risk per trade and watch the spread change.

Median ending balance after 200 trades$19,67445% winners at +2.00R, losers at −1.00R: +0.35R per trade

Expectancy: +0.35R per trade
Expected value, first trade: +$35.00
Worst 5% end below: $14,167
Best 5% end above: $27,321
Finish below the start: 0.1%
Drawdown of 20% or worse: 0.8%
Max drawdown, median: 8.9%
Max drawdown, worst 5%: 15.1%
Longest losing streak, median: 8 trades
Longest losing streak, worst 5%: 12 trades

In this hypothetical simulation of 1,000 traders each taking 200 trades at 1.00% risk, the median account ends at $19,674 from $10,000, 0.1% finish below where they started, and half see a drawdown of 8.9% or more along the way.

Every simulated account, trade by trade

Middle 90%Middle 50%MedianSample accountsStart

Horizontal axis: trade number, 0 to 200. Half of the simulated accounts end between $17,331 and $22,841, and nine in ten between $14,167 and $27,321. The faint lines are 8 individual accounts: the same plan, different luck.

Where the accounts finish

Ending balances of 1,000 simulated traders after 200 trades (on a percentage scale; the top and bottom 1% are grouped into the end bars). Grey bars finished below the starting $10,000, marked by the dashed line; 0.1% of accounts are there.

What R means

R is the amount you risk on a trade: what you lose if the trade reaches the point where the idea is wrong. Measuring results in R takes account size out of the picture. A win of 2R made twice what was risked; a loss of 1R lost exactly what was risked. A loss bigger than 1R usually means a gap or slippage through the stop.

To find your own figures, take a record of past trades, divide each result by the amount risked on it, and average the winners and the losers separately.

Expectancy: the edge per trade

Expectancy (R) = win rate × average win − (1 − win rate) × average loss
Expected value per trade = expectancy × amount risked

With the defaults, 45% winners at 2R and losers at 1R, expectancy is 0.45 × 2 − 0.55 × 1 = +0.35R. On a $10,000 account risking 1% ($100), that is $35 per trade on average. A plan can win less than half the time and still have a positive expectancy, as long as the winners are big enough. The break-even win rate is average loss ÷ (average win + average loss).

Why position size matters

Expectancy says whether a plan has an edge. Position size decides what the path to the result feels like, and whether the account survives it. Here is the same plan (45% winners at +2.00R, losers at −1.00R: +0.35R per trade) over 200 trades and 1,000 simulated traders, at two risk levels:

Risk	Median end	Median max drawdown	Worst 5% drawdown	Drawdown of 20%+	Finish below start
1% per trade	$19,674	8.9%	15.1%	0.8%	0.1%
5% per trade	$188,338	40.1%	58.8%	99.8%	0.2%

At 5% risk the median account grows more on paper, but the typical drawdown is about 5 times as deep, and 100% of traders live through a fall of 20% or more, against 1% at 1%. Deep drawdowns are where traders abandon a plan, and recovering from a 50% fall needs a 100% gain. Losing streaks are just as long either way: the risk per trade only decides what they cost.

How the simulation works

Each simulated trader starts with the same balance. On every trade a seeded random number decides whether it wins (with your win rate) or loses. A win adds risk % × average win to the balance; a loss takes away risk % × average loss. Risk is a fixed percentage of the current balance, so positions shrink after losses and grow after wins.

Percentiles are taken across traders: the 5th percentile ending balance is the level only the unluckiest 5% end below. Maximum drawdown is each trader's largest fall from a previous high. "Re-run" draws a fresh set of random trades; the same inputs and seed always give the same result, so a shared link shows the same numbers.

Limitations

This is a hypothetical illustration, not a forecast. It assumes trades are independent of each other, that every win and loss is exactly its average size, and that your win rate and averages hold for every trade ahead. Real trading differs: results cluster as markets change, losses can exceed 1R through gaps and slippage, costs reduce every trade, and few people keep risk constant through a long losing streak. Treat the outputs as a range of what luck alone can do to one set of numbers.

This is Step 4 of The MacroInsight Process: conviction bets. Each bet is sized deliberately from a written invalidation point; this shows why the size matters as much as the idea.