Risk Calculator Instructions
Input
- Win rate：Enter the overall winning percentage of your trading system. For example, a win rate of 50%.
- Average Profit/Loss (Odds)：Enter the average profit earned per winning trade divided by the average loss amount per losing trade. For example, odds of 1.
- Loss % per trade：Enter the percentage of total capital that each trade loss represents. For example, 2% of total capital.
- Number of trades：Enter the number of trades you expect or the total number of trades conducted so far. For example, 100 trades.
- Max drawdown %：Enter the max drawdown percentage that your current trading strategy has ever reached, or if you want to test a new strategy, enter the expected max percentage. For example, a max loss percentage of 30%.
Result
- Loss risk：Display the probability that the ending account balance is lower than the initial account balance after N trades.
- Max loss risk：Display the probability of losses reaching the preset maximum loss percentage.
Please note that the output of the risk calculator may vary as it is based on the simulation of N times repeated operations of trades.
What is Risk of Ruin?
Margin call risk (RoR, Risk of Ruin) is a mathematical model that can be used to calculate the probability of losing all account balances based on the win rate, odds, and loss percentage of each trade.
For example, if a trader’s system performs well, with a win rate of 30%, an average profit/loss (profit factor) of 2, and a loss percentage of 2% per trade, this data can be added to the risk calculator to understand the overall robustness of the trading system. The calculator can also be used to control the risk of strategy margin call and/or peak-to-valley drawdown.
With this calculator, traders can know the chance of their trading account going bust over time using a specific trading strategy. This is based on the win percentage per trade and the average risk percentage. By entering the performance statistics of the trading system into the calculator, traders can easily calculate the risk of ruin for any trading strategy.
You may also find ourDrawdown Calculatorvery useful. It can help traders understand and accurately calculate how the net value of the trading account will be affected after a series of loss trades.