Last Updated on 10 February, 2024 by Rejaul Karim
Risk of Ruin Calculator. This post is finished very soon. Please come back in a couple of weeks. Risk of ruin is the probability that you’ll lose so much money you can no longer continue trading. This doesn’t mean losing all of your trading capital, the ruin point is based on your own personal risk tolerance, so ruin to you could be 15%, it could be 50% or it could be 100%. Understanding the mathematics behind trading risk is critical for any trading operation. While many traders typically utilize only one risk ratio, This simple risk of ruin calculator helps you determine your potential trading risk. Use this tool or browse our other resources to make more informed trades.
The term “risk of ruin” is sometimes used in a narrow technical sense by financial traders to refer to the risk of losses reducing a trading account below minimum requirements to make further trades. Below is a calculator that implements risk of ruin or risk of drawdown calculations based on the two methods described. Risk of ruin often results in bankruptcy, though not necessarily. It’s more intended as a signpost marking the “point of no return” for traders and investors. Here’s a nice calculator of risk of ruin for poker players that easily adapts to trading.