1. The long-term accuracy of the trading system (as seen over a few hundred simulated trades) will stay close to its past accuracy, while the short-term accuracy will vary.
2. The risk and reward parameters will be the same for all the trades, leading to a fixed payoff ratio.
3. The trader will take all the signals that the trading system generates (the trader has a high level of confidence in the system).
4. The outcome of any single trade is absolutely random; the probability that it turns out as a profit or as a loss is controlled by the accuracy of the trading system.
The calculator is made up of three parts which are described in detail below:
1. Controls & Performance Panel
The controls panel allows you to set the parameters that will guide the simulation. You can change all the cells on the controls panel that are coloured in red. Enter your trading system and money management system constraints on the System Controls panel. The Account Controls panel allows you to specify your starting account balance, the target return and if the profits are withdrawn during the course of the simulated trading. The values that you enter on these two controlling panels are used as the inputs for the generation of the trading results shown in the Simulated Account Activity Report, located at the bottom of the page. The information in this report is processed to calculate some of the common trading performance statistics which are displayed on the Performance Panel.
The statistics are generated for two different time periods - for the time period prior to the achievement of the target return (the "Pre-Target" column) and for the whole period of the simulated trading (the "All" column).
The simulator will automatically recalculate everything each time you change one of the controlling cells or press one of the Recalculate buttons on the page.
2. Performance Charts
This section includes two interactive charts which plot the values of the equity and the drawdown by using the data in the "Equity" and the "Drawdown" columns of the Simulated Account Activity Report.
3. Simulated Account Activity Report
This part of the calculator provides detailed trade-by-trade report of the simulated trading. The returns are divided into two columns (for easy viewing) depending on if they are profits or losses. The Equity column shows how the equity develops with each trade and profit withdrawal (when applicable). The Withdrawals column displays the size and the timing of profit withdrawals which are made in accordance with the settings chosen on the Account Controls panel. The Drawdown column measures the distance of the current equity position from the preceding equity peak (when it's below the peak).