Risk of Ruin Calculator
Instructions
Input
- Win rate % Enter the overall win rate percentage of the trading system, for example, 50%.
- Average profit / loss Enter the ratio of average profit to average loss (odds), for example, 1:1.
- Risk per trade % Enter the percentage of total capital that each trade’s loss represents, for example, 2%.
- Number of trades Enter the expected number of trades or the total number of trades conducted so far, for example, 100.
- Max drawdown % Enter the maximum drawdown percentage of the current trading strategy, for example, 30%.
Result
- Risk of peak-to-valley drawdown Displays the probability that after N trades, the ending account balance will be lower than the initial account balance.
- Risk of ruin Displays the probability of the loss 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?
The Risk of Ruin (RoR) is a mathematical model used to calculate the probability of losing the entire account balance based on the win rate, odds, and percentage loss per trade of a trading system.
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 our Forex Drawdown Calculator to be of use. It can assist and accurately calculate the impact on the net value of the trading account after a series of losing trades. Forex Drawdown Calculator