Risk of Ruin Calculator

Risk of Ruin Calculator is a calculator in Forex that gives you two values:

• Risk of peak-to-valley drawdown
• Risk of ruin

Both values are meant to show the probability of ruin on your trading account.

The risk of ruin calculator needs trading results that you have already done or you plan to make in order to calculate risk of ruin and risk of peak to valley drawdown.

It helps you see how successful trading strategy is or it can be. If you are not satisfied with the results you can modify strategy to make better results in order to prevent risk of ruin.

Risk of Ruin Calculator

Risk of ruin calculator requires trading data from your trading account if you have traded already or your trading strategy if you plan to trade.

Here are details about each field you need to enter into the risk of ruin calculator to get the results:

• win rate %
  • In this field you should input the win rate percentage of the trading system. For example, 30% win rate
• Average profit / loss
  • In this field you should enter the average profit earned per winning trade, divided by the average amount lost per losing trade. For example 2 as the average profit
• Risk per trade %
  • traders should not risk more than 2% of the account equity per trade. So I will use 2% as the risk per trade
• Number of trades
  • For example, I will input 50 as the total number of trades for our current trading strategy
• Max drawdown %
  • For an example, I will input a 30% maximal drawdown reached with our current trading strategy

Risk of Ruin Calculator Meaning

Meaning of risk to ruin calculator is the percentage of losing your money on the trading account where you would not be able to trade anymore.

Risk of ruin calculator means how likely or how probable is your trading strategy bad to bring your trading account down where you would not be able to trade.

There are results in this calculator and those are:

• Risk of peak-to-valley drawdown
• Risk of ruin

Risk of Peak-to-Valley Drawdown

Risk of Peak to Valley drawdown is the largest cumulative percentage decline in portfolio value from a previous equity high.

Remember that it is the largest cumulative percentage drop and not one drop of 20% or any other percentage.

It is defined as the percentage decline from the trading account’s highest value (peak) to the lowest value (valley) after the peak.

If you put Max drawdown to 20% in the risk of ruin calculator field and you get the peak to valley results 20% this could mean that your trading strategy is showing a 20% probability of reaching 20% drawdown from an equity high to a subsequent equity low.

This helps you see how quick decline could be. If you lower max drawdown to 10% this would be better because you have 20% to get back to 10% loss from your equity peak.

Risk of Ruin

The risk of ruin percentage results show the result of our trading strategy, in this case 10%. This means that our trading strategy is showing a 10% probability of reaching 20% drawdown of the starting equity amount.

If your risk of ruin percentage is higher that means you have more chances reaching drawdown on your trading account. Higher risk of ruin percentage is not a good result so try to lower the value of risk to ruin result.