RT Drawdown & Risk of Ruin Calculator
For example, if we have a system that performs with a 32% win rate, with an average winner of 3R, we can input that data into the simulator and run it over a number of possible random outcomes to develop an understanding of the overall robustness of our system and how to control the risk of ruin and/or drawdown.
Prob Win – Enter your systems win rate as a decimal – E.G. a 32% win rate as 0.32
Risk:Reward Ratio – If your average win is £200 but your average risk is £100, your RRR is 2.
Risk Amt(%) – percentage of your account risked on trade
Number of periods – what sample size you wish to test / how many trades
Loss Level(%) – the percentage of loss you wish to test for
What’s the difference between Risk of Ruin and Risk of Drawdown?
Risk of Ruin refers to the probability of the percentage loss from your original capital. Eg If you started with £10,000, a 50% Risk of Ruin would calculate the probabilities of your account reducing to £5000.
Risk of drawdown, on the other hand, stays constant regardless of how the account grows, because the drawdown “capital barrier” keeps moving up in line with the equity.
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.