![]() For this example, we will input 50 as the total number of trades for our current trading strategy. If traders are testing a current trading strategy and want to know how it's performing and it's risk of ruin percentage, then just input the total number of trades taken so far. It can be 30 daily trades, 15 weekly trades and so on. If traders are testing a trading strategy and want to know how it will perform based on a number of future trades, then it's only required to input the expected number of trades. So, we will use 2% as the risk per trade. ![]() This professional methodology allows traders to stay on the markets longer and even to recoup the account equity lost with negative trades previously. Risk per trade %: Countless times we've mention that as a rule of thumb, professional traders do not risk more than 2% of the account equity per trade. ![]() For our example we will use 2 as the average profit of our current strategy. For example, let's consider a current trading strategy that yields a 30% win rate.Īverage profit/loss: In this field traders should enter the average profit earned per winning trade, divided by the average amount lost per losing trade. Win rate %: In this field traders should input the overall win rate percentage of the trading system. By entering the data of a trading system's performance stats, and with the RoR calculator above, traders can easily calculate the risk of ruin of any trading strategy. This is based on the win rate percentage and the average risk percentage per trade. With this calculator traders can know the chances of blowing their trading account over time, with a particular trading strategy. But the calculator can also be used to control the risk of ruin of the strategy and/or the peak-to-valley drawdown. The Risk of Ruin (RoR) is a mathematical model that can be used to calculate the chances of losing all of the account balance based on the win/loss % of a trading system and risk % used per trade.įor example, if a trader has a system that performs well with a 30% win rate, with an average profit factor of 2, and risking 2% per trade, this data can be added to the Risk of Ruin Calculator and used to develop an understanding of the overall robustness of the trading system. ![]() Use our Risk of Ruin Calculator to accurately calculate the peak-to-valley drawdown and the probability of reaching the maximal drawdown based on the win/loss rate and risk percentage of a trading system. ![]()
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