Risk & Simulation
Why a win rate is not enough to evaluate a strategy
“70% win rate” sounds good. Yet that figure alone reveals neither the robustness nor the real risk of a strategy. This is one of Cantara’s reasons for being: reasoning in distributions, not averages.
Gain / loss asymmetry changes everything
A 70% win rate with an unfavourable gain/loss ratio can destroy capital, while a 40% rate with good asymmetry can create it. The win rate alone ignores the magnitude of gains and losses — that is, the essential.
Sizing dominates the outcome
Position size often weighs more than decision quality. Risking too high a fraction of capital turns a normal losing streak into ruin. A position-sizing simulator makes this reality tangible before it is endured.
Think in distributions, not averages
An average hides dispersion. A Monte Carlo simulation, by replaying thousands of trajectories, exposes the range of possible outcomes — including the extreme scenarios the average erases. It is this range that informs a prudent decision.
Drawdown is the real constraint
The maximum loss endured along the way — the drawdown — often determines whether a strategy is sustainable, psychologically and financially. A strategy “profitable on average” but with an unbearable drawdown will never be seen through.